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Multiagent System Simulations of Treasury Auctions

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    Abstract

    This study uses a multiagent system to determine which payment rule provides the most revenue in Treasury auctions that are based on Canadian rules. The model encompasses the when-issued, auction, and secondary markets, as well as constraints for primary dealers. I find that the Spanish payment rule is revenue inferior to the Discriminatory payment rule across all market price spreads, but the Average rule is revenue superior. For most market-price spreads, Uniform payment results in less revenue than Discriminatory, but there are many cases in which Vickrey payment produces more revenue.

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    Bibliographic Info

    Paper provided by Department of Economics, University of Victoria in its series Department Discussion Papers with number 0709.

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    Length: 69 pages
    Date of creation: 19 Nov 2007
    Date of revision:
    Handle: RePEc:vic:vicddp:0709

    Note: ISSN 1914-2838
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    Related research

    Keywords: Axiomatic bargaining; resource monotonicity; transferable utility; risk aversion;

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    1. Kjell G. Nyborg, 2004. "Multiple Unit Auctions and Short Squeezes," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 17(2), pages 545-580.
    2. Chris D'Souza & Charles Gaa, 2004. "The Effects of Economic News on Bond Market Liquidity," Working Papers, Bank of Canada 04-16, Bank of Canada.
    3. Klaus Abbink & Jordi Brandts & Paul Pezanis-Christou, 2002. "Auctions for Government Securities: A Laboratory Comparison of Uniform, Discriminatory and Spanish Designs," UFAE and IAE Working Papers, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) 551.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    4. Nyborg, Kjell G. & Sundaresan, Suresh, 1996. "Discriminatory versus uniform Treasury auctions: Evidence from when-issued transactions," Journal of Financial Economics, Elsevier, Elsevier, vol. 42(1), pages 63-104, September.
    5. S. Viswanathan & James J. D. Wang, 2004. "Inter-Dealer Trading in Financial Markets," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 77(4), pages 987-1040, October.
    6. Arupratan Daripa, 1996. "A Theory of Treasury Auctions," Archive Working Papers, Birkbeck, Department of Economics, Mathematics & Statistics 006, Birkbeck, Department of Economics, Mathematics & Statistics.
    7. Alan Mehlenbacher, 2007. "Multiagent System Simulations of Signal Averaging in English Auctions with Two-Dimensional Value Signals," Department Discussion Papers, Department of Economics, University of Victoria 0708, Department of Economics, University of Victoria.
    8. Leonardo Bartolini & Carlo Cottarelli, 1997. "Designing effective auctions for treasury securities," Current Issues in Economics and Finance, Federal Reserve Bank of New York, Federal Reserve Bank of New York, vol. 3(Jul).
    9. Goldreich, David, 2007. "Underpricing in Discriminatory and Uniform-Price Treasury Auctions," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 42(02), pages 443-466, June.
    10. George Iden & Marco Arnone, 2003. "Primary Dealers in Government Securities," IMF Working Papers 03/45, International Monetary Fund.
    11. Alan Mehlenbacher, 2007. "Multiagent System Simulations of Sealed-Bid Auctions with Two-Dimensional Value Signals," Department Discussion Papers, Department of Economics, University of Victoria 0707, Department of Economics, University of Victoria.
    12. Ali Hortacsu & Samita Sareen, 2005. "Order Flow and the Formation of Dealer Bids: Information Flows and Strategic Behavior in the Government of Canada Securities Auctions," NBER Working Papers 11116, National Bureau of Economic Research, Inc.
    13. Merrick, John Jr & Naik, Narayan Y. & Yadav, Pradeep K., 2005. "Strategic trading behavior and price distortion in a manipulated market: anatomy of a squeeze," Journal of Financial Economics, Elsevier, Elsevier, vol. 77(1), pages 171-218, July.
    14. Chatterjea, Arkadev & Jarrow, Robert A., 1998. "Market Manipulation, Price Bubbles, and a Model of the U.S. Treasury Securities Auction Market," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 33(02), pages 255-289, June.
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    Cited by:
    1. Alan Mehlenbacher, 2007. "Multiagent System Platform for Auction Simulations," Department Discussion Papers, Department of Economics, University of Victoria 0706, Department of Economics, University of Victoria.

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