Price dynamics with circuit breakers
研究了熔断机制（价格跌至或涨至预设值后暂停交易）对资产价格动态的影响，发现其会加剧触发点前的价格波动并产生“磁吸效应”，提出基于波动率而非价格水平的熔断设计可缓解副作用。
We model the dynamics of an asset price in the presence of a circuit breaker. A circuit breaker is a trading halt imposed by the exchange after the price drops below (or rises above) a pre-specified value within a trading session. The investors' anticipation of the probability of a halt feedbacks on the price process. In a general stochastic financial framework, this leads to coupled integral and stochastic differential equations. With first-order analytical solutions and numerical treatment, the theory predicts an increased price volatility prior to the trigger point, as has been reported in the empirical literature. We show that the sole existence of a circuit breaker leads to the adverse effect of attracting the price to the circuit breaker level (known as the ‘magnet effect’). We then propose first steps towards a more robust design of circuit breakers. In particular, we show that a trading halt that is conditioned on a pre-specified volatility level, instead of price level, mitigates the negative side effects of increased volatility. The methodology proposed in this article serves as starting point for the design of more resilient circuit breaker mechanisms.