Date of Original Version

11-8-2011

Type

Working Paper

Rights Management

All Rights Reserved

Abstract or Description

We introduce a new mechanism for call auctions which are widely used in stock exchanges. By incorporating contingent claims (buy stock A, if selling stock B) into the price discovery process, we achieve a higher liquidity in call auctions and lower volatility after opening call auctions. We also show that present call auctions and the proposed mechanism have similar incentive properties.

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Business Commons

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