Abstract
Derivative instruments have become increasingly important to financial institutions, institutional investors, traders and private individuals throughout the world, both as risk-management tools and as a source of revenue. The volume of over-the-counter (OTC) traded derivatives has increased enormously over the past decade, because institutional investors have often had a need for special derivative products which are not traded on organized exchanges. An important feature of OTC trading is the bargaining on multiple attributes of a contract such as price, strike price and contract maturity. Negotiation on multiple attributes of a deal is currently not supported by electronic trading floors. In this paper we describe an approach of how to automate the multi-attribute multilateral negotiations using a Web-based trading system. First, we will give an overview of various approaches to supporting or automating negotiations on multiple attributes. Then we will introduce multi-attribute auctions, an extension of single-sided auction theory and analyze preliminary game-theoretic results. Finally, we will show a Web-based electronic trading system for OTC derivatives, based on multi-attribute auctions.
Original language | English |
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Pages (from-to) | 401-414 |
Number of pages | 14 |
Journal | Information Systems Frontiers |
Volume | 1 |
Issue number | 4 |
DOIs | |
State | Published - 2000 |
Externally published | Yes |
Keywords
- Electronic exchanges
- Financial derivatives
- Microeconomic engineering
- Multi-attribute auctions
- OTC trading