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|seen||May 22 '12 at 15:34|
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?