Question

In a Dutch auction of 10,000 options, bids are as follows: $A$ bids $$\$ 30$$ for 3,000; B bids $$\$ 33$$ for 2,500 ; $\mathrm{C}$ bids $$\$ 29$$ for 5,000 ; $\mathrm{D}$ bids $$\$ 40$$ for 1,000 ; $\mathrm{E}$ bids $$\$ 22$$ for 8,000 ; and $\mathrm{F}$ bids $$\$ 35$$ for 6,000 . What is the result of the auction? Who buys how many at what price?

   In a Dutch auction of 10,000 options, bids are as follows: $A$ bids $$\$ 30$$ for 3,000; B bids $$\$ 33$$ for 2,500 ; $\mathrm{C}$ bids $$\$ 29$$ for 5,000 ; $\mathrm{D}$ bids $$\$ 40$$ for 1,000 ; $\mathrm{E}$ bids $$\$ 22$$ for 8,000 ; and $\mathrm{F}$ bids $$\$ 35$$ for 6,000 . What is the result of the auction? Who buys how many at what price?

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Options, Futures, and Other Derivatives

Options, Futures, and Other Derivatives

John C. Hull 10th Edition

Chapter 16, Problem 11

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Step 1

First, let's sort the bids in descending order of price: $$ \begin{align*} E: \$22 & \text{ for 8,000} \\ C: \$29 & \text{ for 5,000} \\ A: \$30 & \text{ for 3,000} \\ F: \$35 & \text{ for 6,000} \\ B: \$33 & \text{ for 2,500} \\ D: \$40 & \text{ for 1,000} Show more…

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In a Dutch auction of 10,000 options, bids are as follows: $A$ bids $$\$ 30$$ for 3,000; B bids $$\$ 33$$ for 2,500 ; $\mathrm{C}$ bids $$\$ 29$$ for 5,000 ; $\mathrm{D}$ bids $$\$ 40$$ for 1,000 ; $\mathrm{E}$ bids $$\$ 22$$ for 8,000 ; and $\mathrm{F}$ bids $$\$ 35$$ for 6,000 . What is the result of the auction? Who buys how many at what price?

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