Transactional Risk, Market Crashes, and the Role of Circuit Breakers

ISBN: 9781332247448 出版年：2016 页码：39 Bruce C Greenwald Jeremy C Stein Forgotten Books

The authors develop a pair of models that illustrate how imperfections in transfunctional mechanisms can lead to a market crash. Neither market orders nor limit orders allow traders to condition their demands on the full information set needed to achieve a Walrasian outcome. When volume shocks are sufficiently large, the deviations from Walrasian prices and allocations are large also. Properly designed and implemented, circuit breakers may help to overcome some of these informational problems and thereby improve the market's ability to absorb large volume shocks. Copyright 1991 by University of Chicago Press.