Reputation
Top tag
Next privilege 50 Rep.
Comment everywhere
Badges
3
Impact
~2k people reached

  • 0 posts edited
  • 0 helpful flags
  • 1 vote cast
Apr
18
comment Implied Volatility from American options (binomial)
Both sources you provide either apply the bisection method on Black-Scholes or on European-style binomial trees. They do mention that it is applicable to American-style options but provide no illustration. What happens when the American-style option is in an exercise region so there is an early exercise premium? how does this affect the implied volatility?