Demand functions in Polish Treasury auctions

Michal Krawczyk

Bank i Kredyt, 2009, vol. 40, issue 4, 31-49

Abstract: I introduce a new approach to modeling aggregate bidding functions (demand functions) submitted by participants of share auctions, the one based on (scaled) normal cumulative distribution functions. I provide a simple model illustrating how normal cdf-shaped demand might arise. Then, using new data from the Polish Treasury securities auctions, I show first, that assumptions of the model underlying the normal cdf specification fit the stylized characteristics of the data set and, second, that this approach actually generates a slightly better fit than the traditional approximation by logistic function. I also relate the parameters of the fitted function to economic variables known prior to the auction. This method appears to be a useful tool for early detection of slumps in the performance of a particular auction design.

Keywords: Treasury auctions; normal cumulative distribution function; underpricing (search for similar items in EconPapers)
JEL-codes: C31 C51 D44 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (1)

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