Modelling the Blind Principal Bid Mechanism: A Large Deviation Approach

Christos Giannikos and Andreas Kakolyris
Additional contact information
Andreas Kakolyris: The O’Malley School of Business, Manhattan College, USA

International Journal of Business and Economics, 2020, vol. 19, issue 2, 187-200

Abstract: This paper focuses on the mechanism of blind principal bid (BPB) which is the result of an auction. An agent auctions a large basket of transactions in several stocks to brokers who do not know the individual stock names, but only some generic characteristics of the basket. The client delivers this large amount of sales and purchases to the winning broker who has to simultaneously trade the basket for a fixed commission fee. The commission is paid on the basis of the winning bid at the auction, usually submitted as cents per share. This study provides a new model, based on large deviations (LD) approximation results, that may facilitate brokers to formulate their bids. A numerical example is used to illustrate the methodology and the model is being compared with a Monte Carlo approximation.

Keywords: Blind Principal Bid; Large Deviations; Portfolio Loss; Bidding-Auctions (search for similar items in EconPapers)
JEL-codes: D47 G10 G20 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://ijbe.fcu.edu.tw/assets/ijbe/past_issue/No.19-2/pdf/vol_19-2-4.pdf (application/pdf)
https://ijbe.fcu.edu.tw/assets/ijbe/past_issue/No.19-2/abstract/04.html (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ijb:journl:v:19:y:2020:i:2:p:187-200

Access Statistics for this article

International Journal of Business and Economics is currently edited by Hsiang-Tsai Chiang (Editor-in-Chief), Chiung-Ju Huang (Editor-in-Chief), Feng-Jyh Lin (Associate Editor), Tzu-Ching Weng (Associate Editor), Hsin-Yi Huang (Managing Editor) and Szu-Hsien Ho (Managing Editor)

More articles in International Journal of Business and Economics from School of Management Development, Feng Chia University, Taichung, Taiwan Contact information at EDIRC.
Bibliographic data for series maintained by Szu-Hsien Ho ().