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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?
