Limit price

About: Limit price is a research topic. Over the lifetime, 4865 publications have been published within this topic receiving 148546 citations.

Determinants of immediate price impacts at the trade level in an emerging order-driven market

Abstract: Common wisdom argues that, in general, large trades cause large price changes, whereas small trades cause small price changes. However, for extremely large price changes, the trade size and news play a minor role, while liquidity (especially price gaps on the limit order book) is a more influential factor. Hence, there might be other factors influencing the immediate price impacts of trades. In this paper, through mechanical analysis of price variations before and after a trade of arbitrary size, we identify that the trade size, the bid–ask spread, the price gaps and the outstanding volumes at the bid and ask sides of the limit order book have an impact on the changes in prices. We propose two regression models to investigate the influence of these microscopic factors on the price impact of buyer-initiated partially filled trades, seller-initiated partially filled trades, buyer-initiated filled trades and seller-initiated filled trades. We find that they have quantitatively similar explanatory powers and these factors can account for up to 44% of the price impacts. Large trade sizes, wide bid–ask spreads, high liquidity at the same side and low liquidity at the opposite side will cause a large price impact. We also find that the liquidity at the opposite side has a more influential impact than the liquidity at the same side. Our results shed new light on the determinants of immediate price impacts.

Accounting for Changing Prices: The Value Relevance of Historical Cost, Price Level, and Replacement Cost Accounting in Mexico

Abstract: This paper investigates the value relevance of historical cost, price level and replacement cost accounting using a sample of Mexican firms from 1989 to 1995. It contributes to prior research by distinguishing between two distinct aspects of changing prices:(1) the change in the general price level, and (2) the change in the value of specific non-monetary assets. I select Mexico to examine because it is unique in requiring and disclosing separately price level and replacement cost adjustments. A sample of Mexican firms also addresses a key reason cited for mixed results in previous assessments of the usefulness of price level and replacement cost accounting using United States data: the effects of inflation are too weak to detect. High rates of inflation in Mexico, ranging between 7% and 52% during the sample period, mitigate that potential problem. Results indicate that replacement cost adjustments are relatively and incrementally relevant beyond historical cost and price level measures while price level adjustments are incrementally value relevant beyond historical measures.

The Price of Power - The Valuation of Power and Weather Derivatives

Abstract: Pricing contingent claims on power presents numerous challenges due to (1) the nonlinearity of power price processes, and (2) time-dependent variations in prices. We propose and implement an equilibrium model in which the spot price of power is a function of two state variables: demand (load or temperature) and fuel price. In this model, any power derivative price must satisfy a PDE with boundary conditions that reflect capacity limits and the non-linear relation between load and the spot price of power. Moreover, since power is non-storable and demand is not a traded asset, the power derivative price embeds a market price of risk. Using inverse problem techniques and power forward prices from the PJM market, we solve for this market price of risk function. During 2000, the market price of risk represented as much as 50 percent of PJM power forward prices for delivery during summer months. This is plausibly due to the extreme right skewness of power prices; this induces left skewness in the payoff to short forward positions, and a large risk premium is required to induce traders to sell power forwards. This huge risk premium suggests that the power market is not fully integrated with the broader financial markets. The data also suggest that power forward prices overreact to current demand shocks.