Solution

ID: past-exam-of-the-probability-statistics-and-options-i-course-of-the-university-of-oxford/2008/f/1/b/solution

The inverse function theorem states that if is continuously differentiable near and is invertible, then neighborhoods of and exist on which is a bijection with a continuously differentiable inverse, satisfying .
Here , , and
The hypotheses hold because both components are smooth. Inverting the matrix yields

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