Auction technique, Financial Management

Auction Technique

Auction is the most common method to sell Government Securities. Other methods include tap sales, syndication and book building process. Presently many countries do not allow the direct participation of all investors in an auction. Instead, they are permitted to participate in the auctions through authorized intermediaries like banks and Primary Dealers (PDs). Actually, the investor base that participates in the auction process is determined by the practical situation of the process and in some cases the controlled investor base determines the evenness in the auction techniques and combinations. Discriminatory price auction is one of the options due to which the investors keep away because of the winners curse. The disadvantage is that there is a danger of irresponsible bidding and uniform collusion.

One cannot say which is better: discriminatory or uniform price auction. A combination, that is, discriminatory auction with a ceiling can be considered as important in this context, as it reduces the winners curse.

Usually the central bank does not participate in auctions, but if the situation necessitates, it has to take part in the auctions without competing with other bidders. Sometimes the central bank is involved in buying Government Securities on its own and sometimes it is compelled to do so. In countries such as Indonesia and Peru, the laws eliminate the participation of central bank in primary auctions and in countries like Malaysia, Philippines and Hungary the central banks restrict themselves from participating in the primary market.

 

Posted Date: 9/10/2012 7:43:37 AM | Location : United States







Related Discussions:- Auction technique, Assignment Help, Ask Question on Auction technique, Get Answer, Expert's Help, Auction technique Discussions

Write discussion on Auction technique
Your posts are moderated
Related Questions
Exam technique for analysing performance The below steps must be adopted when answering a question on analysing performance: Step 1    Review figures as they are and commen

Q. Cost of capital? The terms of cost of capital refers to the minimum rate of the return a firm must earn on its investment so that the market value of the company equity shar

The question to be answered is : "Since the 1990 opening of stock exchanges, China started to use financial statements to determine the performance of listed companies. What were c

What do you mean by Interest rate swap? Explain the various types of interest rate swap Meaning: It is an arrangement where by one party exchange one set of interest rate paymen

Using the operation cycle and any other financial management knowlegde, discuss the applicability of such cycle to poultry business in uganda( consider broilers)

Q. Rate of the growth of the business? The working capital requirement of the a concern increase with the growth and expansion of the business activity although it is difficu

Control ratios: Three important ratios are usually used by the management to find out whether the variations from budgeted results are unfavorable or favorable.  These ratios are

Explain about the term investment intermediaries. Investment intermediaries: Investment intermediaries contain finance companies, mutual funds and investment banks and se

The following are extracts of the Income Statement and Balance Sheet for Umar plc. Extract Balance Sheet at 30 June 20X2               20X1 £'000  £'000                £

dividend decisions has an influence on the share value and subsequently the overall company value.