The Pricing of the Option Implicitly Granted by the Italian Treasury to the Specialists in the Reserved Auction Reopening

Chiara Coluzzi ()
Additional contact information
Chiara Coluzzi: Università di Roma "Tor Vergata"

Rivista di Politica Economica, 2011, issue 1, 189-221

Abstract: The Italian Treasury selects a group of Specialists within the Government securities primary market participants. They benefit from a set of obligations and privileges. Academic literature paid scant attention to the privilege of participation in reserved auction reopenings, i.e. the right to buy predetermined additional quantities of Government securities at the auction price. This paper attempts to price this privilege as a call option in the framework of the Cox - Ingersoll - Ross model. No matter the one-day life, it has a value significantly different from zero. Moreover, it helps to explain part of the mispricing between the primary and secondary market.

Keywords: term structure of interest rates; option pricing; auctions; mispricing (search for similar items in EconPapers)
JEL-codes: D49 E43 G13 (search for similar items in EconPapers)
Date: 2011
References: Add references at CitEc
Citations: View citations in EconPapers (1)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:rpo:ripoec:y:2011:i:1:p:189-221

Access Statistics for this article

Rivista di Politica Economica is currently edited by Gustavo Piga

More articles in Rivista di Politica Economica from SIPI Spa
Bibliographic data for series maintained by Sabrina Marino ().