|
|
| Author |
Thread Statistics | Show CCP posts - 1 post(s) |
DiablosMajora
Occultum Scientia
Black Flame.
4
   |
Posted - 2014.04.01 03:46:00 -
[1] - Quote
I've always wondered, why hasn't a formal financial market been made for EVE or DUST? Instead of having just our commodity market, why not financial markets? It would add a whole different dimension to Trading (as I've done in EVE, Jita memories). For a TLDR of the post, skip to the bottom.
For simplicity and practicality, I suggest that borrowers and lenders are exclusively corporations and their officers, while speculators can be corporations or individuals.
The finance market can be split into three distinct categories:
1) Borrowers
2) Lenders
3) Speculators
1 - Borrowers Alms for the poor?
The borrower is corporation that finds itself with a potential profitable business prospect (whether a secret & lucrative mineral pocket, a resource intensive manufacturing project with extremely high demand, or a sparsely defended piece of real estate), but is for one reason or another short of funds. While the corporation could continue operations as normal to produce an income to close the funds-gap, they sacrifice another important resource... time, or opportunity cost. To save themselves time, the corporation borrows funds. This can be accomplished through LOANS (see below.
2 - Lenders Good Goy
The lender is a corporation that sits on a hefty sum of capital, but wishes to start growing their asset base. The corporation does this by making LOANS.
Loans include features such as:
a) Up to a three-month duration (short-term), to one-year (long-term).
b) Collateral, that will be held in escrow until the loan is paid. An asset (such as items, or even planets/districts. In such a scenario the planet will be 'owned' by the lender but controlled and run by the borrower to pay the debt-service).
c) Interest, to be determined by the creator of the loan, to be compounded over a number of periods (daily, weekly, monthly) and also determined at creation of the loan. Paid in isk.
The lending process works as such...
A borrower opens the market tab, subsection Financial. Here they can enter in some parameters for a loan that fits their needs (amount lent, collateral value [determined by market], interest rate, etc). A list of competitive loans fills the screen, best fitting the borrower's requirements. After looking over the details, the borrower puts up their required collateral into escrow, and accepts the loan. Their wallet is now brimming with dosh, their collateral unusable until the loan is paid.
Simple process. But ah, our borrower happened to find a low-collateral loan and has decided to default for lack of payment. CONCORD gets pissed, and congratulations you now have a bounty on your head for the remainder of the loan! That borrower's collateral, if any, is now deposited into the lender's asset base as sorry compensation.
3 - Speculators Toppins?
What I think is the most important by far, much moreso than lending & borrowing, and something that can be done by individuals or corporations. Speculators try to predict future prices and bet on their predictions.
Speculation, I think, can be implemented by the creation of financial contracts, aka Derivatives. There are a few derivatives in particular that would be useful, namely:
a) Option contracts - best described as 'insurance' on a position, and can be used to hedge. For simplicity, only covered calls and puts can be bought/sold; sellers of "call" contracts must put up required items in the contract escrow until the contract is cancelled or bought. If it is bought, the buyer can buy the items at any point before expiration of the contract. Sellers of "put" contracts my put the required isk for the determined amount of items in escrow until cancelled or bought. Contracts also go out for up to a three-month period.
Example - A trader believes that the price of an item will rise in the near future, so he buys a lot of that item. Fearing that the price may also drop, he buys an option contract (in this case, a "put") for a small premium. The "put" give him the right to sell his lot of items for a predetermined price (the "exercise price"). If the price falls below the "exercise price", he can limit his loss (or even make a profit, if the price swing is large enough). The seller of the "put" contract, however, gains the small premium but *must* buy the lot of items as the exercise price, thus incurring a substantial loss!
There is also a similar scenario in the opposite.
Suppose a trader thinks prices are going to fall dramatically, so he starts selling all of his items. To limit any dumb mistakes from possible increasing prices, he buys a 'call' contract, where if the market price exceed the exercise price, the trader has the right to buy so many goods at the exercise price from the seller of the call contract.
b) Futures contracts
A contract where two parties agree to an exchange of goods for isk at a predetermined price at a predetermined date. Contracts also only go out for up to a three-month period. All goods and funds are put up in escrow until the future date arrives.
TLDR - Let us: lend isk, borrow isk, and use derivative contracts to create a robust financial system in the DUST universe. Such a system would also send signals to devs/players about certain items, due to their prices and, especially, volatility. Wars would be fought over resources like never before. Titans of industry would rise and fall. Epics written about the "Great DUST Depression".
Prepare you angus
|
DiablosMajora
Occultum Scientia
Black Flame.
4
|
Posted - 2014.04.01 03:56:00 -
[2] - Quote
@Odigos Ellinas
Did they add borrowing/lending & derivatives to EVE? If so, where the hell have I been?!
@ Saberwing
Would a financial market be feasible once a vanilla player's commodity market was up and running?
Prepare you angus
|
DiablosMajora
Occultum Scientia
Black Flame.
6
|
Posted - 2014.04.01 13:43:00 -
[3] - Quote
@Hansei Kaizen
Yes, the big corps that already have massive sums of isk would have a starting advantage. But also think, if they're playing with that money in the financial markets they have enormous sums to also lose.
If a big bet of theirs happens to go under, they fold. The recent financial collapse of 2008 is a brilliant example! And what's even better, there will be no such thing as "Too Big To Fail", there will be no greater entity to rescue those corporation from financial distress, nothing, nada, zilch. Imminent collapse of that corporation's power structures, and with nothing left to defend their asset base (in this case, districts, planets, and manufacturing bases), the WARS would be magnificent. It would be absolute and utter chaos.
As to your externalities question, I'd expect that with a speculation component the markets would be much more volatile... Especially if options and futures become a thing. If some unforeseen event comes around and disrupts the market, that is the price that is paid, and that is how things work in real life. I'd expect that the market would recover much faster, though.
Regarding the creation of assets, the finance market assumes some sort of manufacturing component, whether from EVE or DUST, or some combination of the two. It wouldn't work the way things currently are, unfortunately.
Prepare you angus
|
DiablosMajora
Occultum Scientia
Black Flame.
6
|
Posted - 2014.04.01 21:01:00 -
[4] - Quote
bump
Prepare you angus
|
DiablosMajora
Occultum Scientia
Black Flame.
7
|
Posted - 2014.04.01 22:22:00 -
[5] - Quote
Kigurosaka Laaksonen wrote:CCP Saberwing wrote:CCP Z (yes, real Dev name) is examining and looking to build a fully-functioning DUST economy. You're right - currently the economy doesn't function as it should but I assure you we're taking it seriously and have someone on board working to make it right! Is CCP Z looking at making a DUST only economy? With plans to later integrate it into the EVE economy? Would a DUST only economy somehow hinder an integrated economy? If so, I'd be fine waiting to have the integrated economy, rather than a DUST only economy that could potentially make us wait even longer for an integrated economy.
babby steps
Prepare you angus
|
DiablosMajora
Occultum Scientia
Black Flame.
8
|
Posted - 2014.04.02 21:26:00 -
[6] - Quote
Hansei Kaizen wrote:DiablosMajora wrote:@Hansei Kaizen Yes, the big corps that already have massive sums of isk would have a starting advantage. But also think, if they're playing with that money in the financial markets they have enormous sums to also lose. If a big bet of theirs happens to go under, they fold. The recent financial collapse of 2008 is a brilliant example! And what's even better, there will be no such thing as "Too Big To Fail", there will be no greater entity to rescue those corporation from financial distress, nothing, nada, zilch. Imminent collapse of that corporation's power structures, and with nothing left to defend their asset base (in this case, districts, planets, and manufacturing bases), the WARS would be magnificent. It would be absolute and utter chaos. As to your externalities question, I'd expect that with a speculation component the markets would be much more volatile... Especially if options and futures become a thing. If some unforeseen event comes around and disrupts the market, that is the price that is paid, and that is how things work in real life. I'd expect that the market would recover much faster, though. Regarding the creation of assets, the finance market assumes some sort of manufacturing component, whether from EVE or DUST, or some combination of the two. It wouldn't work the way things currently are, unfortunately. Good arguments there. Thank you for replying. I think your last point would then depend on CCP initializing the right "unforseen" events at the right time to disrupt the system a little. The amount of hate from the alliances with the greatest losses would be unprecedented though, becaue the events are not really random and unforseen, but planned, willed and implemented by CCP ... Could you pose a solution to such a scenario? Would appreciate your opinion.
"Unforseen" events in this case are things like servers being DDOS'd (as the EVE servers were before by Lulzsec), Goons blocking off a whole area of space from Ice Mining (driving the prices of ice to the moon), or hotfixes/stealth nerfs.
Speculation, in a way, is already a thing in DUST (oh, ccp accidentally made an aurum AV-nade available for isk? better buy a lot! oh I got BPOs? better save them!).
My solution to your question though... Dont' fly/fit/bet/risk what you can't afford to lose.
Prepare you angus
|
DiablosMajora
Occultum Scientia
Black Flame.
8
|
Posted - 2014.04.08 00:40:00 -
[7] - Quote
bampu
Prepare you angus
|
|
|
| |
|