Consider the following set of orders for the VOD stocks Time Traders Order Side Size Price 10:00
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Question:
Consider the following set of orders for the VOD stocks
Time | Traders | Order Side | Size | Price |
10:00 | ABC | Sell | 4 | 20 |
10:05 | DEF | Buy | 3 | 21 |
10:08 | GHI | Buy | 5 | 20 |
10:09 | JKL | Sell | 5 | 22 |
10:10 | MNO | Buy | 7 | 18 |
10:15 | PQR | Sell | 7 | Market |
10:18 | STU | Sell | 5 | 19 |
10:20 | VWX | Buy | 6 | Market |
10:30 | YZ | Sell | 4 | 21 |
Assume that the above orders are sent to a single-price call auction.
- Apply price and time priority, match the orders, find the equilibrium price and list all the possible trades. Show the order book with all the orders that remain unexecuted after the call auction. Explain the options available for the unexecuted orders.
- Make appropriate assumptions, draw the demand and the supply schedules, and compute the traders' total surplus. Explain what the total surplus represents and why we measure it.
Consider sending the same set of orders to a continuous two-sided auction. Apply price-time priority and the discriminatory pricing rule and list the first 3 trades.. Compute the trading surplus for these 3 trades. Compare and contrast single-price auctions and continuous two-sided auctions.
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ISBN: 978-0840064158
2nd edition
Authors: Kathleen D. Bauer, Doreen Liou, Carol A. Sokolik
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