A perfectly divisible corporate bond is allocated to a set of bidders characterized by limits both to their budget, but most importantly to the risk entailed in their portfolio. Bidders possess symmetric information concerning the secondary market's yield. We choose to use a uniform pricing...

There has been a rapid growth in the use of investment mandatesfor the management of fixed-income assets. In this paper, we examinehow the limits set in investment mandates can affect the bidding strategyduring the issuance of a corporate bond. We apply the uniform-priceauction and prove the...

Dealers, who strategically supply liquidity to traders, are subject to both liquidity and adverse selection costs. While liquidity costs can be mitigated through inter-dealer trading, individual dealers' private motives to acquire information compromise inter-dealer market liquidity. Post-trade...

We examine the bidding behavior of institutional investors in initial public offering (IPO) auctions using a hand-collected data set of limit bids. We find that the majority of institutional investors in our sample are “occasional bidders,” who rarely get a share allocation. “Regular...

In illiquid and fragmented limit order book markets, asynchronously arriving buyers and sellers have a coordination problem. This problem is particularly strong mid-day, when trading is generally thin. We evaluate a market structure reform at Nasdaq Nordic, where the continuous trading session...

We study how institutional investors utilize potentially biased information by analyzing the effect of IPO underwriters' earnings forecasts on investors' bidding behaviors in Chinese IPO auctions. Despite the presence of upward biases in underwriters' earnings forecasts, we nd that investors'...

Central counterparties (CCPs) are systemically important. When a clearing member defaults, the CCP sells the defaulted portfolio to surviving members in an auction, and losses, if any, are partly absorbed by a cash pool prefunded by the surviving members. We propose a tractable auction model...

We document a higher bond return volatility around the time of default for bonds included in CDS auctions (especially cheapest-to-deliver bonds) versus those that are not, while controlling for firm fundamentals and bond illiquidity. This finding does not extend to time periods far ahead of...

Recent literature attributes the temporary drop in secondary Treasury prices before a Treasury auction to primary dealers' limited risk-bearing capacity. However, we document a decline of more than 45% in the Treasury Inflation-Protected Securities (TIPS) auction amount allocated to dealers over...

We analyze the informational properties of hybrid IPO auctions using a large and unique database of 115,707 bids from institutional investors in 715 auctioned IPOs between 2009 and 2012 in China, where an IPO auction is first conducted among institutions, after which a fixed price offering is...