2010 Poster Sessions : Blind Portfolio Auctions

Student Name : Michael Padilla
Advisor : Benjamin Van Roy
Research Areas: Information Systems
Abstract:
A large volume of assets are sold by institutional investors to execution service providers through blind portfolio auctions, which are typically first-price sealed-bid auctions in which the seller engages a few potential buyers and provides very limited information about the portfolio contents. Due to the blind nature of the bidding process, brokers are concerned about adverse selection effects and this concern is naturally factored into their bids, resulting in a higher price for the client. Through the use of a trusted intermediary, or equivalent cryptographic protocols, we propose a mechanism in which the bid formation process of each broker is maximally informed, while each broker themselves is maximally uninformed, denied explicit knowledge of the basket until necessary. This research studies and demonstrates the improved efficiency and seller revenue in such an alternative auction format.

Bio:
Michael Padilla is a PhD candidate in the Department of Electrical Engineering, where he is a member of the Information Systems Laboratory. Prior to Stanford, he worked in the Institutional Equity Division of Morgan Stanley Japan Ltd., in their Tokyo branch. He holds an S.M. degree from MIT and a B.S. degree from UCSD, both in electrical engineering and has held internship positions with the Process Driven Trading group at Morgan Stanley, Apple Computers, and KDDI Japan. His research interests are in computational finance and economics, machine learning, multi-agent systems, and market microstructure.