Final answer:
A daily price limit in the financial markets is known as a circuit breaker, which is a control mechanism to halt trading on a stock or index when a specified price limit is reached in order to prevent extreme market volatility. The correct option is B.
Step-by-step explanation:
Another name for a daily price limit in the context of financial markets is a circuit breaker. A circuit breaker is a measure implemented by stock exchanges to temporarily halt trading on a security or index when a pre-defined price limit has been reached.
This mechanism is designed to prevent extreme volatility and to allow information to be disseminated to investors, thereby promoting a more orderly market.
In practice, if a stock's price rises or falls too rapidly within a trading day, hitting the set percentage limits, trading is paused for a certain period of time. The percentage at which trading is halted varies between exchanges and is based on the previous day's closing price of the securities.
The idea is to curb panic selling or overly exuberant buying, giving traders time to assess the situation and make more informed decisions.