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limit


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1 The maximum fluctuations (up or down) allowed in a particular market over a stated period (usually one day's trading; see intraday limit). In some volatile circumstances the market may move the limit up (or down). The movement of prices on the Tokyo Stock Exchange is limited in this way as it is on certain US commodity markets. In some markets, if the limit is reached trading is stopped for the day or for a cooling-off period. A price movement that reaches the limit is known as a limit move.

2 A restriction on a derivatives or commodity exchange on the number of contracts or positions one party can hold.

3 A risk limit in relation to, for example, the credit exposure to a particular counterparty.

4 See at limit.

Subjects: Financial Institutions and Services.


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