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Treasury actions: The Spanish format

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Abstract

The Spanish Treasury is the only Treasury in the world that uses a hybrid system of discriminatory and uniform price auctions to sell government debt: winning bidders pay their bid price for each unit if this is lower than the weighted average price of winning bids, and pay the weighted average price of winning bids otherwise. Following Gordy (1996), we model the Spanish auction as a common value auction of multiple units with private information, allowing for multiple bids. Simulations show that bidders use bid spread to hedge against both uncertainty and the winner's curse, and that the expected seller's revenue is higher in the Spanish than in the discriminatory auction in a number of cases.

Suggested Citation

  • Francisco Álvarez & Cristina Mazón, 2002. "Treasury actions: The Spanish format," Documentos de Trabajo del ICAE 0228, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
    • Handle: RePEc:ucm:doicae:0228
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    1. Klaus Abbink & Jordi Brandts & Paul Pezanis-Christou, 2001. "The Spanish Auction for Government Securities: A Laboratory Analysis," UFAE and IAE Working Papers 482.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    2. Michael B. Gordy, 1999. "Hedging Winner'S Curse With Multiple Bids: Evidence From The Portuguese Treasury Bill Auction," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 448-465, August.
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    More about this item

    Keywords

    Subastas; Subastas del Tesoro; Subasta española; Subastas de múltiples unidades; Auctions; Treasury auctions; Spanish auction; Multi-unit auctions.;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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