We study security-bid auctions in which bidders compete for an asset by bidding with securities. That is, they offer payments that are contingent on the realized value of the asset being sold. Standard auction mechanisms (such as first-price and second-price auctions) are not well defined unless...

We study security-bid auctions in which bidders compete for an asset by bidding with securities. That is, they offer payments that are contingent on the realized value of the asset being sold. Standard auction mechanisms (such as first-price and second-price auctions) are not well defined unless...

Abstract Mandatory convertibles, which are equity-linked hybrid securities that automatically convert to common stock on a pre-specified date, have become an increasingly popular means of raising capital in recent years (about $20 billion worth issued in 2001 alone). This paper presents the...