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How should I calculate the implied volatility of an American option in a real-time production environment?

I am starting a project and would be grateful for some practical advice. My focus is on the informational content of equity derivatives, (index, ETF & stocks). A central metric here is obviously IVOL. My question is what are the “industry” standard models for backing out IVOL from equity option prices? By “industry” I mean widely used by market practitioners. And which models have the best robustness & ease of implementation / accuracy trade off? Are there any pitfalls I should avoid?

To date my reading is taking me towards CRR tree solutions. I am aware of stochastic vol models and have looked at variations on the Model Free IVOL theme. But what would be most appropriate in today’s market?

  • $\begingroup$ Hi Tom, welcome to quant.SE. Please see the previous question linked above. If you still have any other questions, update your question. $\endgroup$ Commented Dec 6, 2011 at 20:46
  • $\begingroup$ Thanks for the pointer - that is exactly what I am seeking. Regards. $\endgroup$
    – Tom
    Commented Dec 7, 2011 at 9:27


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