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Michał Thlon

Michał Thlon

is Assistant Professor of Finance at the Department of Economics, Cracow University of Economics (Poland). In 2010 he defended his doctoral thesis on operational risk management in enterprises. He is a court expert in banking, compliance and risk management. He is a member of GARP and PRMIA. His articles have been published in various international journals, such as the Geneva Papers on Risk and Insurance He is a member of Editorial Review Board of “Journal of Quantitative Finance and Economics”. He is the coordinator or an expert for over 50 research projects at the international or national level in the field of risk management, innovation and business environment. He is author and co-author of over 100 monographs, articles, advisory reports and research papers. His research interests focus on financial econometrics, pricing of derivatives, financial economics and risk management.

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Kosiorowski Grzegorz, Sieradzki Rafał, Thlon Michał: Game-theoretic approach to IPO underpricing: issuer vs broker

Issuer and broker that are involved in an Initial Public Offering play a game in which they have to agree on the issue price. In a situation when both parties are risk neutral the issuer will tend to set the price as high as possible because this maximizes his proceeds from the IPO given the number of sold shares is fixed. On the other hand, the broker tries to lower the issue price because this maximizes the probability of selling all offered shares and at the same time to minimize his level of effort. We prove that the behavior of the issuer and the broker completely change if we assume that both parties are risk averse. Bearing in mind that the issuer is more risk averse than the broker because he carries a considerable fixed cost hiring the broker. In this situation the issuer will bargain with the broker to lower the issue price and the broker will try to set this price higher.

Last modified: 2019.09.17.