Auction Rate
Auction rate refers to the interest rate that will be paid on a Treasury security that has been auctioned off, Dutch style. A Dutch auction allows investors to make offers in terms of price and quantity, so the auctioneers can determine which price is best after the offers are made. This interest rate is stuck until the next auction. This style is also used on municipal bonds, and long-term auction rate securities.
Investment banks are common investors in these Treasuries. The upside is that it allows ample time to determine the interest rates, but the downside is that sometimes there aren't enough investors.
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Finance: What is an Auction Market?13 Views
Finance a la shmoop... what is an auction market.. next up on the block [Man speaking on stage]
we've got stock in the company comb Depot....
okay yeah so the New York
Stock Exchange is an auction market and you have no idea how much caffeine I had [Man holding a monster energy drink]
to have to get that right which means that the prices on the new york stock
exchange happen during a bidding process we're matching offers get you know [People frantically rushing to bid for stocks]
matched... buyers and sellers buy and sell at the
same time so in essence two transactions are happening at once the opposite of
this sort of market is the over the counter or OTC market where dealers are
the ones holding all the cards and they ultimately determine the price by [Dealer with the cards]
creating a spread from where they're willing to sell your shares and what
price they'll pay to buy your shares but in an OTC market well you don't get to [Dogs running side by side]
feel like you're watching the last leg of a greyhound race so you don't get all
my caffeinated auction talk there which is kind of cool we like that, right..right?
Up Next
What is a Dutch Auction? A Dutch Auction is either one where closed quantity and price bids are entered and the price is set at the highest price t...
A liquid market is a market featuring high trading volumes, i.e. investors actually want to put their cash to work.