True Interest Cost in Municipal Bond Bidding: An Integer Programming Approach

Robert M. Nauss
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Robert M. Nauss: School of Business Administration, University of Missouri---St. Louis, St. Louis, Missouri 63121-4499

Management Science, 1986, vol. 32, issue 7, 870-877

Abstract: Over $47 billion of tax exempt debt issues were sold to the public in 1982. A portion of this total was offered to municipal bond underwriters under a competitive bidding system using the criterion of minimum true interest cost (internal rate of return). The TIC bidding problem may be formulated as a nonlinear integer program. We develop a linearization which is embedded in a special purpose integer linear branch and bound algorithm. Computational results for several actual bidding problems are presented.

Keywords: integer programming; finance; mathematical programming; competitive bidding (search for similar items in EconPapers)
Date: 1986
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:32:y:1986:i:7:p:870-877

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