Market Discussions

Interesting idea Candy. I don't care if you are making money in the process as long as my interests are covered.
All I want to know is, do you cover larger investments ? (10b-20b ) and what are the fees you are talking about in the OP ?

Please excuse me if this information is provided, but I'm at work and I don't have time to read everything thoroughly .

Thank you.

its not only that... your "securing" a deal with nothing but your personnal reputation.

when it comes to uncollaterlized bonds, where one of the two possibleoutcomes is that somebody is getting scammed, the "worst case scenario" isnt entirely unimportant, imho.

Bonds arent necessary scams, but those who arent collateralized or secured by a third party (lol, a oldschool one I mean) most like likely are.

I mean you wouldnt ignore the "worst case scenario" on Bonds that are getting posted in Jita-local either and its not that of a long way from there to forums.

We are just spittballing the idea at the moment, Using the OP. lets take your current investment in Savieritrade 10b. (hope you don't mind but i read the thread.

The math is:

10B in High risk bond. (No collateral)

Your deposit is 2.5b (returned to you at conclusion of bond)
Your fee is 100m (Not returnable) (needs to be looked at)
Payout In Case of non scam, successful bond: 2.5b
Payout Sum in case of scam is 2.5b + (0.1 of 10b = 1b) (10% is the unsure figure)
Payout: 3.5b. approx 35 days after defaulted amount.

It works by your deposit isk being rolled into Arnold (head of my science nerds) invention/production chain. & Station trading.

Its kinda like me gambling as Vera puts it on whether something is correct or not, it can also be used as a scam option as Bad bobby said. The exposure levels for both Insurance holders & myself are extremely high, and pretty much not worth the effort. Its been a fun little spitball session though, i wonder if any new mechanics CCP introduces will changes things.

First off toss out that the idea is publically run, and its all my own iskie bananas.

agreed, If i was covering 100% no-one would purchase it, using the deposit idea im essentially offfering a loan for no interest infact they pay me, which is silly.

If i only insure for 10% of the amount, using only 25% as a deposit, (both numbers variable due to impossible calculations of demand) Those numbers may work for a 500m deposit but not for a 2.5b deposit.

as posted above, if poor ol Lux loses his rocks & is back to mining in a frig, hes only getting 1b back thru insurance.that 1b for me to create will take some time, which is why i thought the 35 days to roll it in & give time to swallow to loss. the insurance monies can't be created from thin air, which is a problem as well.




I think a more accurate way to gauge an offering is a whiskey bottle & a 20c coin. (best 2 out of 3) sad but true.

I actually should add a bit more commentary to this:

Another possibility would be that MD has a risk model that is just as good as yours but that MD is risk-averse and thus forces business managers to offer higher rates on uncollaterlaized bonds than would be expected when just taking the risk of default/scam into account.

Your insurance has a lot of capital and is (via insurance policies) invested in many offerings and can thus act like a truly risk-neutral investor - pocketing the premium on interest rates induced by most investors' risk aversion to turn a profit.

This is how "traditional" insurance works - I only have one car which I can't afford to lose so I am willing to pay a premium (beyond what would be suggested by solely taking the probability of loss into account) to avoid such a catastrophic outcome.

However, financial investors in EVE as irl already know very well not to put all eggs into one basket. They don't have one car that they cant afford to lose, they have a hundred differnet bits and pieces from a hundred different cars. The minimum investments for most offerings in MD are not large enough to force individual investors away from diversification (you see the parallels between an insurance and an investment fund?).
Investors probably are already pretty close to risk-neutral (at least they should try to be and have the tools to do so).

So to make money you need a better grasp on the risks of unsecured offerings than "the market". The market for unsecured offerings is pretty spotty, interest rates are often chosen based on psychological criteria (nice thresholds such as 10%, 15%, ...) or the desire to impress rather than due to pure supply/demand (e.g. a Dutch auction) and most MD regulars (me included) have never done proper analysis of how risky which classes of offerings really are (relying on gut instinct instead).

There definetely is room for coming up with a risk model that is more efficient than what MD investors use intuitively and once you have any such a model you could identify offerings with an interest rate that is "too high" and profit from them in several ways (one such way being to sell insurance).

But coming up with a better model that is not only able to stand the test of the past (running it against past investment opportunities to see if it would have resulted in profitable investments) but can also cope with people reacting to the model being used in practice (they'd try to make their scams resemble offerings that your model rates highly) is hard.

Some of the people that would run scams exploiting such an insurance scheme would be at least as smart as this would-be insurance provider and have a much less challenging task to perform.

I don't see any way this could be anything but bad for MD and the wider investment community right now. If the investment community were to mature significantly then that could change. But from what I've seen recently, things are devolving rather than evolving.

I think one of your challenges may be the spread though. Now adays allot of these bonds offer a really low percent such as 2 % (i.e. grendel) and if you're taking 1% say, than the effective profit is cut in half. Could you give us perhaps a full example of a current bond that you would rate and how it would work so that everyone can fully realize your insurance model?

Thanks,
Ark

Why exactly would you pay someone like Candy to insure your investment with Grendell (or someone similar)?

If someone is trustworthy enough for you to accept a 2% ROI on an investment with them then Candy will just lower the safety of your investment, not increase it.

The market for Candy's idea is unsecured offerings in the 6-10% range and there are plenty of those.

why exactly would anybody take up this anyway?



so say you invest 2 bil in a non collateralised loan of which as you say there are plently, you take out the insurance 500 mil in there. he's going to charge 50 mil in fee to make it worth while so on a 2 bill loan you looking to get 150 mil back . so on a 10% loan your not even securing the interest payment.....

Candy did clearly state that the numbers were all placeholder figures. Using them for any analysis seemed entirely redundant to me. If the idea ever received even a breath of life I would expect the numbers to change dramatically and be at least viable in a shallow sense.

My concern, is not that nobody would use the proposed service but that somebody might use it. As an unused service it would do little harm and as a cautionary example to others it may even do some good. If anyone was to actually make use of it, even if the pre-req for doing so was utter retardation, then it would be a very bad thing.