An empirical test of auction methods in the primary market of sovereign debt

  1. Matías Jiménez 1
  2. Asunción Mochón 1
  1. 1 Universidad Nacional de Educación a Distancia, Madrid
Revista:
Revista española de financiación y contabilidad

ISSN: 0210-2412

Año de publicación: 2023

Volumen: 52

Número: 4

Páginas: 622-652

Tipo: Artículo

DOI: 10.1080/02102412.2022.2154533 DIALNET GOOGLE SCHOLAR

Otras publicaciones en: Revista española de financiación y contabilidad

Resumen

There has been a long debate as to which of the most extended systems, the uniform system or the discriminatory price system, is the most appropriate for central banks and debt management offices issuing sovereign bonds. The purpose of this paper is to shed light on this question. The main variables to explore the auction mechanisms are the price difference between the primary and secondary markets (price spread) and the coverage ratio. Subsequently, to determine patterns for clarifying which auction system is optimal, we propose a new model based on the price spread and a valuation model for financial options that covers both negative and positive spreads. We conclude that the auction method and the number of primary dealers are relevant parameters in the auction outcome. Finally, the results of the new model are the cornerstone for identifying detailed patterns followed by top-performing countries.

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Fuente de los datos: Dialnet