Price Discovery

Price discovery is the process of determining the accurate price of an asset in the market. This process is particularly relevant in options and futures markets or when a new asset or class is introduced. When an event occurs that may impact an asset’s price, such as a major product release or executive change in a publicly traded company, the short-term price fluctuates until the event is factored into the price. The market’s reaction during this period represents the phase of price discovery. Experienced individuals with knowledge and access to changing market data tend to benefit from this phenomenon.