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Why do we never see PLEX being used as collateral?
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virm pasuul
Imperial Academy
Amarr Empire
#1 - 2016-01-23 21:57:46 UTC
Title says it all really.
I don't ever remember seeing anyone use PLEX as collateral.
Anyone care to theorise?
Edwin Rothbard
Interstellar Arbitrage
#2 - 2016-01-23 22:18:36 UTC
because it's very easy to liquidate. Stuff often used for collateral is often illiquid and/or in the case of prints also being used at the same time as being offered to collateralize an offering.

Rothbard's Casino
Darkstar01
Doomheim
#3 - 2016-01-23 22:39:07 UTC
Edwin Rothbard wrote:
because it's very easy to liquidate. Stuff often used for collateral is often illiquid and/or in the case of prints also being used at the same time as being offered to collateralize an offering.


This. Sometimes an item that's hard to liquidate is used as collateral, and then it gets liquidated while it's being held as collateral.
virm pasuul
Imperial Academy
Amarr Empire
#4 - 2016-01-23 23:40:16 UTC  |  Edited by: virm pasuul
PLEX is probably the most liquid thing after raw ISK itself agreed.
But for the last year or so the price has only gone up bar the odd short lived dip.

If you held PLEX they would make great collateral - they are going up in value whilst they are being held at the same time as you are off investing their face value and hopefully making even more profit.

I would assume that anyone would be happy to take PLEX as collateral, because they are so easy to liquidate. You might even get away with a lower over collateralisation level if you were using PLEX.


As long as the PLEX price keeps inexorably trending upwards, you are almost better off using them as collateral, than selling and using the ISK. Their price rise alone should cover interest on the loan.

Basically not only are you investing the loan amount and making profit, your collateral is also hard at work......
Teckos Pech
Hogyoku
Goonswarm Federation
#5 - 2016-01-24 19:59:08 UTC
virm pasuul wrote:
PLEX is probably the most liquid thing after raw ISK itself agreed.
But for the last year or so the price has only gone up bar the odd short lived dip.

If you held PLEX they would make great collateral - they are going up in value whilst they are being held at the same time as you are off investing their face value and hopefully making even more profit.

I would assume that anyone would be happy to take PLEX as collateral, because they are so easy to liquidate. You might even get away with a lower over collateralisation level if you were using PLEX.


As long as the PLEX price keeps inexorably trending upwards, you are almost better off using them as collateral, than selling and using the ISK. Their price rise alone should cover interest on the loan.

Basically not only are you investing the loan amount and making profit, your collateral is also hard at work......


Actually...have you looked at the time series for PLEX prices?

While the long term trend is upwards, it is not a day-over-day or even a month-over-month increase. For example, from about October 2011 through July 2012 the growth rate in PLEX prices was pretty flat. It then rose sharply for a few months...then declined again losing almost all of its gains. Again in July 2014 through April 2015 we saw pretty much the same thing.

So there are periods where the price of PLEX is relatively stable. We are in one of those periods right now. PLEX prices have been pretty flat since about September of last year.

Since most bonds are for 2,3 or 4 months you'd probably be just as good liquidating the PLEX, doing your thing, then re-purchasing.

Oh and the recent run up in PLEX prices started right around the time of the Mosaic release. Hmmm wonder what it could have been? P

"The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design."--Friedrich August von Hayek

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ZmajOgnjeniVuk
Doomheim
#6 - 2016-01-24 20:32:52 UTC
Aside from liquidity, I'd say the constant price fluctuation.
Sabriz Adoudel
Move along there is nothing here
#7 - 2016-01-24 22:17:53 UTC
PLEX and minerals are the easiest things in the game to convert to ISK or back again, even in enormous quantities. PLEX are even easier than minerals (a quarter trillion ISK worth of a minerals basket will take a while to liquidate).

I have seen a couple of loans with PLEX as collateral (IIRC Angelica Everstar had 350 PLEX as part of the collateral for a 0.7 trillion loan) but it is uncommon.

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virm pasuul
Imperial Academy
Amarr Empire
#8 - 2016-01-25 11:27:45 UTC
Some good comments, thanks guys. Also thanks for that example Sabriz, I didn't know of that.