error: epstopdf Output filename not allowed in restricted mode

may occur if you include .eps files above the directory of the .tex file. LaTeX by default cannot traverse upwards from the current “*.tex” directory. This is generally a good security choice.

When necessary, it is possible to bypass this security by including the --shell-escape option in pdflatex command:

pdflatex --shell-escape myfile.tex

In TeXmaker / TeXstudio, under: Options → Configure → Commands add --shell-escape right after pdflatex in the PdfLaTeX command box.

This example shows when --shell-escape is needed. Assuming files

~/work/report.tex
~/matlab/plot.eps

This LaTeX content triggers the error until --shell-escape is used.

\includegraphics{../matlab/plot.eps}