Mastering Python for Finance - Second Edition

Determining strike price boundaries

When selecting options used in the VIX Index calculation, calls and puts with bid prices of zero are ignored. For far out-of-the-money (OTM) put options where strike prices are lower than k0, the lower price boundary terminates when two consecutive zero bid prices are encountered. Similarly, for far OTM call options with strike prices more than k0, the upper price boundary terminates when two consecutive zero bid prices are encountered.

The following function, find_lower_and_upper_bounds(), illustrates the process of finding the lower and upper boundaries in Python code:

In [ ]:    def find_lower_and_upper_bounds(df, k0):        """        Find the lower and upper boundary strike prices. :param df: the pandas DataFrame ...