The Pricing of the Option Implicitly Granted by the Italian Treasury to the Specialists in the Reserved Auction Reopening

Coluzzi, Chiara

doi:10.2139/ssrn.1102306

Cited by 1 publication

(3 citation statements)

References 28 publications

(54 reference statements)

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“…Finally, the last two remaining dummies (option and num_pd) result as not significant at all. The latter result is reasonable considering that in a context of overpricing the call option is worth less because the strike price is higher than the price of reference in the secondary market, i.e the option is out of the money (though an option still has a value, see Coluzzi, 2007). 38 I conclude noticing that my results on the role of winner's curse (vol_mts) and competition (cover) are remarkably consistent with those obtained by Goldreich (2007), 39 whereas they are at odds with respect to the results on auction formats.…”

Section: )mentioning

confidence: 94%

“…Still, Nyborg and Strebulaev (2004) study how a potential short squeeze impacts on bidders' strategies and auction performance, and how the design of the auction affects the incidence of short squeezes. 33 See Coluzzi (2007) which values such an option granted by the Italian Treasury to primary dealers, relying on a time homogenous one factor CIR model.…”

Section: A Puzzle For the Conventional Auction Theorymentioning

confidence: 99%

“…41-43 in Sareen (2004). 41 Coluzzi (2007) compares the value of the call options granted by the Treasury with the respective overpricing costs for a subsample of the Italian Treasury auctions held in 2004. Such call options are valued on the basis of a time homogenous one factor CIR model.…”

Section: A Tentavive Evaluation Of One Of the Rents Enjoyed By The Prmentioning

confidence: 99%

See 2 more Smart Citations

Auctioning Government Securities: The Puzzle of Overpricing

Pacini

2009

SSRN Journal

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The empirical analysis shows that this cannot be viewed as a success of the issuing technique or as the result of the discretion enjoyed by some Treasuries in the stop-out price setting procedure, but rather as a consequence of the Treasuries bundling the securities auctioned with a number of commodities, such as the syndication rights. Since the overpricing may harm the long-run competitiveness of Treasury auctions by driving the smaller primary dealers out of the primary market, I suggest discontinuing the bundling or exploring alternative auction mechanisms such as the clock auctions, and in particular those which put up different items simultaneously.

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Section: )mentioning

confidence: 94%

Section: A Puzzle For the Conventional Auction Theorymentioning

confidence: 99%