## A Theory of Price Limits in Futures Markets, Issue 102Center for the Study of Futures Markets, Columbia Business School, Columbia University, 1984 - Commodity exchanges - 38 pages |

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absolute price change assume basis risk CBOT Soy beans combination of margin commodities controlling default cost of margin cost of trading cost parameter credit risk currency daily price changes daily price limit daily settlement rule default margin requirement default option delivery month Differentiating 30 DISTRIBUTED PRICE CHANGES dN(X/ox efficient contract design eliminate default risk equilibrium futures price equilibrium price exceed the margin exchange external information forward contract forward market futures contracts futures markets hypothesis of efficient imit 1 imit imposed incentive to renege investor KCBT least some market limit the daily limits and margin limits exist margin and limit margin is costly market participants normally distributed price NYCSCE optimal combination panic and speculation possible price change exceeds price changes follow price limit rule price volatility Probability of Default risk neutrality signal noise spot and futures stock index futures Telser THEORY OF PRICE trading interruptions uniform distribution zero