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


  • Chiara Coluzzi

    () (Università di Roma "Tor Vergata")


The Italian Treasury selects a group of Specialists within the Government securities primary market participants. They benefit from a set of obligations and privileges. Academic literature paid scant attention to the privilege of participation in reserved auction reopenings, i.e. the right to buy predetermined additional quantities of Government securities at the auction price. This paper attempts to price this privilege as a call option in the framework of the Cox - Ingersoll - Ross model. No matter the one-day life, it has a value significantly different from zero. Moreover, it helps to explain part of the mispricing between the primary and secondary market.

Suggested Citation

  • Chiara Coluzzi, 2011. "The Pricing of the Option Implicitly Granted by the Italian Treasury to the Specialists in the Reserved Auction Reopening," Rivista di Politica Economica, SIPI Spa, issue 1, pages 189-221, January-M.
  • Handle: RePEc:rpo:ripoec:y:2011:i:1:p:189-221

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    More about this item


    term structure of interest rates; option pricing; auctions; mispricing;

    JEL classification:

    • D49 - Microeconomics - - Market Structure, Pricing, and Design - - - Other
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing


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