Auction technique, Financial Management

Assignment Help:

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.

 


Related Discussions:- Auction technique

Regulatory aspect in employees provident fund organization, Regulatory Aspe...

Regulatory Aspect Employees Provident Fund Organization (EPFO) is under the Ministry of Labor and is a primary organization for retirement income for private employees in India

Define capital rationing, What is capital rationing?  Should a firm practic...

What is capital rationing?  Should a firm practice capital rationing?  Why? The term Capital rationing is the practice of setting dollar limits on what will be invested in new ca

Importance of capital budgeting decision, Q. Importance of Capital Budgetin...

Q. Importance of Capital Budgeting Decision? 1. Such Decision affect the profitability of the Firm: - Capital Budgeting decision influences the long-term profitability of a fir

Economic order quantity, annual uasage of stock 100,000units carrying ...

annual uasage of stock 100,000units carrying cost per unit of stock RM2 order cost RM250 question there is a constraint arising from the floor space of the

Calculate the net present value of cash flows, Assume a firm has the follow...

Assume a firm has the following cash flows for the next five years: $50,000, $100,000, $150,000, $200,000, and $300,000. We start this business with an initial investment of $250,0

Merits of net present value method, Q. Merits of net present value method? ...

Q. Merits of net present value method? Merits of NPV method:- (i) Time value of funds is taken into consideration: - For the reason that this method takes into account the t

Management accounting and financial management, Q. Distinguish between Mana...

Q. Distinguish between Management Accounting and Financial Management with clear mention of basis of differences. How does the traditional financial manager differ from the mode

Business have a positive accounting profit, Can a business have a positive ...

Can a business have a positive accounting profit and a negative economic profit? Please explain.

Can you explain about finance function, Q. Can you explain about Finance fu...

Q. Can you explain about Finance function? Finance function is the most important function of the all business function. It remains a focus of the all activity. It is not possi

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd