Portfolio bidding

Companies benefiting from a diversified portfolio of generating stations can, during low price periods, rely on portfolio bidding , that is, occasionally bid at prices below the generation cost (investment and fuel) of their capital-intensive equipment. For instance, if one company adds... 

The networked environment on the Internet offers a possibility of allowing such portfolio-based transactions. In essence, the desired auction mechanism must unbundle and rebundle offers and bids presented by both sellers and buyers. A prototype of such a mechanism is a portfolio trading algorithm developed for the investment community (Fan et al. 1999 Srinivasan et al. 1999). Its basic setup, however, can extend into procurement process in manufacturing as well as bundle trading in physical products tmd persontil services. 

The DMO will acquire amounts of stock as a result of its secondary market operations, and these holdings may be made available for resale into the market. Although it does not actively offer stock to the market, when holdings are made available from its portfolios the DMO will announce via its news screen the stock on offer, and the size available this is known as the DMO s shop window. No offer price is indicated, but bids must be at the market level or above acceptance is at the DMO s discretion. If more than 50 million of one issue is on offer a minitender is held, announced via the DMO s news screens. 

A much easier method of generating leverage in a credit portfolio is through credit default swaps (CDS). They let investors take on or lay off default risk in an unfunded manner. Selling default protection enables one to receive the premium associated with the additional credit risk without the need to buy a bond of that entity, and in the process creates enormous leverage, especially for higher rated credits. The increased liquidity and the compression of bid/offer spreads have added to the attractiveness of this market. 

Transaction costs Certain indices ignore bid-offer spreads, which means that bonds get in and out of the index at the same price. Bid-offer spreads and other transaction costs, which affect real portfolios, can cause an index that ignores these to outperform by a significant amount. 

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