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UID:20251028T134339EDT-2956d6ZJ4B@132.216.98.100
DTSTAMP:20251028T174339Z
DESCRIPTION:'Treasury auctions during a crisis'\n\nRohit Lamba (Penn State)
 \n	November 4\, 2022\, 3:30 to 5:00 PM\n	Leacock 429\n\nHost: Rohan Dutta\n	F
 ield: Theory\n\nAbstract:\n	Treasuries all over the world sell sovereign bo
 nds through an auction which is typically conducted by the central bank. W
 hen volatility in financial markets is high\, auctions may fail to elicit 
 the true price of the bond. To study the impact of increased uncertainty o
 n bidder behavior in treasury auctions\, we introduce (a) risk averse pref
 erences and (b) common uncertainty in the valuation of the underlying secu
 rity. Using detailed bid-level data on the Indian Treasury Bill market aro
 und the (in)famous episode called taper tantrum\, we estimate bidders’ val
 uations in a model of multi-unit discriminatory price auction. We find tha
 t average bid shading increases substantially during this period leading t
 o a big loss to the exchequer. A large part of the increase in bid shade i
 s explained by the rise in uncertainty as measured by activity in the seco
 ndary market. We also uncover systematic heterogeneity across bidders. Whi
 le some bidders bid at low prices because their valuations are low\, other
 s bid less as a strategic response to the increased uncertainty. We evalua
 te two alternative selling mechanisms − uniform price auction and a fixed 
 price tender. We find that switching the pricing rule to uniform does not 
 reduce bidder surplus. A fixed price mechanism\, on the other hand\, can h
 elp stabilize the market without affecting revenue much.\n
DTSTART:20221104T193000Z
DTEND:20221104T210000Z
LOCATION:Room 429\, Leacock Building\, CA\, QC\, Montreal\, H3A 2T7\, 855 r
 ue Sherbrooke Ouest
SUMMARY:Rohit Lamba (Penn State)\, 'Treasury auctions during a crisis'
URL:/economics/channels/event/rohit-lamba-penn-state-t
 reasury-auctions-during-crisis-340591
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