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A Combinatorial Auction with Equilibrium Price Selection
KTH, School of Information and Communication Technology (ICT).
2015 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

Financial markets use auctions to provide accurate liquidity snapshots for traded instruments. Combination orders, such as time spreads require the atomic trading of more than one security contract. In order to auction such complex order types, a new design, which considers all contingent instruments simultaneously, is required.

This work develops an optimization model and a software implementation of the dualsided multi-unit combinatorial auction problem. The optimization objective is finding an equilibrium price vector and a winner selection such that the auction turnover is maximized.

The auction requirements are modeled as a discrete optimization problem, suitable for standard integer programming solvers. The model’s correctness and tractability are tested using synthetically generated orders as well as real market data.

Test results with both synthetic and authentic orders produced equilibrium prices within 3% of the expected instrument valuations, using closing prices as a benchmark, indicating high accuracy of the solutions. The use of combinatorial auctions exposes greater liquidity and overall turnover, both valuable to exchanges that receive large numbers of combination orders.

Place, publisher, year, edition, pages
2015. , 87 p.
Series
TRITA-ICT-EX, 2015:108
Keyword [en]
Combinatorial auction, Equilibrium price, Discrete optimization
National Category
Computer and Information Science
Identifiers
URN: urn:nbn:se:kth:diva-177495OAI: oai:DiVA.org:kth-177495DiVA: diva2:873057
Educational program
Master of Science - Distributed Computing
Examiners
Available from: 2015-11-25 Created: 2015-11-23 Last updated: 2017-06-15Bibliographically approved

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CiteExportLink to record
Permanent link

Direct link
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Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf