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Professor Bunsen
Optech Scientific
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Posted - 2008.12.23 13:24:00 -
[1]
I have been away from the markets for some months conducting a personal research project (aka ****ed off and a bit knackered after the plebs failed to see the genius of my last project Eve-Index)
"Bond" A
- 10b total value
- The whole of the bond funds held by Ebank, Chribba, or equivalent trusted entity(not discussed with them yet)
- 6% monthly return
- 0.4% chance per month of total loss p=0.004 (based on objective out of game criteria)
"Bond" B
- 5b total value
- The whole of the bond funds held by Ebank, Chribba, or equivalent trusted entity(not discussed with them yet)
- 20% monthly return
- 15% chance per month of total loss p=0.15 (based on objective out of game criteria)
Flame on !
Bunsen [Eve-Index][Traded Mineral Options Tutorial] |

Ricdics
Tleilex Developments Dara Cothrom
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Posted - 2008.12.23 13:30:00 -
[2]
So your bonds have a chance of failure based on external criteria that investors are not privvy too? |

Professor Bunsen
Optech Scientific
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Posted - 2008.12.23 13:40:00 -
[3]
Originally by: Ricdics So your bonds have a chance of failure based on external criteria that investors are not privvy too?
No. Of course the failure/loss criteria would be explicit before anyone buys in. Visible, verifiable, real world, unable to be manipulated etc.
[Eve-Index][Traded Mineral Options Tutorial] |

Ambo
State Protectorate
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Posted - 2008.12.23 14:02:00 -
[4]
Edited by: Ambo on 23/12/2008 14:03:35 I'm going have have to post this for the second time today:
What on earth are you talking about?
It seems that this is essentially a gamble. In the case of bond A, you're willing to bet that the full amount will be 'lost' (i.e. you end up with it?) before you've payed out more than the 10bil value at a rate of 600 mil per month.
With a rate of 'failure' of 0.4%, this seems like a bet you would be destined to lose.
I find myself intrigued despite my initial confusion... Ok, so lets be serious for a minute:
With both bonds (assuming they didn't immediatley collapse), you'd be paying out 1.6 bil per month from your normal business (as all the capital raised is locked away with a third party).
How long could you keep this up?
Also, what would happen should you not pay up or decide to cancel the whole thing?
I enjoy a flutter. I don't like the slowness of Bond A but the chances of losing the bet with Bond B are a bit high for my tastes... I'll put down 2 bil on Bond A assuming I've understood correctly and the third party is sorted, chance of failure properly defined, etc.
Actually, Now that I think about it, 6% is DBank's general account rate I believe. Evidently I rate my chances of losing it all with them at higher than 0.4% or I'd just put it there.. hmmm... cogs... turning...
I wonder now if you're just trying to make a point.  --------------------------------------
Trader? Investor? Just want to track your finances? Check out EMMA |

Ambo
State Protectorate
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Posted - 2008.12.23 14:08:00 -
[5]
You've put the decimal point in the wrong place havn't you?
You meant 4%, not 0.4% surely. --------------------------------------
Trader? Investor? Just want to track your finances? Check out EMMA |

cosmoray
Cosmoray Construction
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Posted - 2008.12.23 14:11:00 -
[6]
I am not really sure what you are offering here?
You are running a bond, but also securing it with funds at EBank which pays out less than you are?
You looking for a loan?
Please explain
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Damien Jax
Industrial Research College Ltd
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Posted - 2008.12.23 14:11:00 -
[7]
I'm trying to figure out exactly what you'll be using the money to do... I think I missed something.
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Ambo
State Protectorate
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Posted - 2008.12.23 14:14:00 -
[8]
If it's 0.4% chance, I'll take the whole 10bil. If it's 4% then scratch me off the list.  --------------------------------------
Trader? Investor? Just want to track your finances? Check out EMMA |

Professor Bunsen
Optech Scientific
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Posted - 2008.12.23 14:21:00 -
[9]
Originally by: Ambo You've put the decimal point in the wrong place havn't you?
You meant 4%, not 0.4% surely.
I don't think so. Check my working.
p=1 = 100% p=0.01 = 1% p=0.001 = 0.1% p=0.004 = 0.4% [Eve-Index][Traded Mineral Options Tutorial] |

cosmoray
Cosmoray Construction
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Posted - 2008.12.23 14:24:00 -
[10]
Don't know what your selling, but if your maths are right Bond B has a 60% chance of failing after 4 months.
If all capital is lost at time of failure the longer it runs the more chance of failure. real returns assuming failure:
fails after 1 month = -80% fails at 2 months = -60% fails at 3 months = -40% fails at 4 months = -20% fails at 5 months = even fails at 6 months = 20% profit (3.33% ROI)
There is a 75% chance you won't make it to 5 months, so basically you lose money on this investment. There is a 10% chance of making it 6 months! If it fails you will then have earnt 3.33% ROI over that time!
15% total loss rate per month is amazingly BAD!
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Ambo
State Protectorate
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Posted - 2008.12.23 14:31:00 -
[11]
Originally by: Professor Bunsen
Originally by: Ambo You've put the decimal point in the wrong place havn't you?
You meant 4%, not 0.4% surely.
I don't think so. Check my working.
p=1 = 100% p=0.01 = 1% p=0.001 = 0.1% p=0.004 = 0.4%
If we simply add the probabilities together then that means that the total chance of failure by the time you've payed out 10.2 bil is only 6.8%
Wheras Bond B's total chance of failure is 75% by the time you've paid out 5 bil.
it seems to me that one or the other is out on the probability of failure by a factor of 10... perhaps not though. --------------------------------------
Trader? Investor? Just want to track your finances? Check out EMMA |

Damien Jax
Industrial Research College Ltd
|
Posted - 2008.12.23 14:32:00 -
[12]
Yes, but the first bond looks even more enticing now :P
I'm still wondering what the money is being used for. Are you going to play texas hold-em all the time and worked out you'll only lose part of the time? Or what?
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Adrien Moreau
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Posted - 2008.12.23 14:36:00 -
[13]
How is the chance of loss derived?
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Ricdics
Tleilex Developments Dara Cothrom
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Posted - 2008.12.23 14:46:00 -
[14]
You might as well just run a regulated pyramid scheme. Once the pyramid collapses the player/s left are the losers. As long as it's clearly defined in the business plan it should actually take off. |

Shar Tegral
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Posted - 2008.12.23 15:09:00 -
[15]
Put me down for 1 billion of each bond issuance. 2 Billion of whatever Ambo doesn't insist upon having first.
To Shar -verb: 1 - To say what you mean. 2 - To say what it means. 3 - To say something mean. |

Ambo
State Protectorate
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Posted - 2008.12.23 15:17:00 -
[16]
Originally by: Ricdics You might as well just run a regulated pyramid scheme. Once the pyramid collapses the player/s left are the losers. As long as it's clearly defined in the business plan it should actually take off.
Well in a pyramid scheme, the capital invested at the bottom is used to pay interest to investors higher up. Clearly, that's not happening here because the capital is all locked away.
Perhaps the intention is to use the interest on the bond that collapses first to pay some interest on the other... but then what? Another, even larger bond with lower return and lower failure chance? To lose even more money? (bear in mind it would still all be held by a third party so it's not like Bunsen could run off with it all)
Maybe I'm missing somthing obvious but it certainly seems to me that this is not a pyramid scheme in any form.
In any case, I think Bond A would definatley sell out (I'd buy all 10 bil of it quite happily). Bond B is a tougher proposition but I think it would still sell out. --------------------------------------
Trader? Investor? Just want to track your finances? Check out EMMA |

cosmoray
Cosmoray Construction
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Posted - 2008.12.23 15:22:00 -
[17]
From what OP said, the capital can still get wiped out, even if held by thrid party.
Your money is not gauranteed safe!
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Lexander Morinex
Caldari LDD Investments
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Posted - 2008.12.23 18:25:00 -
[18]
Edited by: Lexander Morinex on 23/12/2008 18:25:46 Since the math I have seen tends to have a few errors, I will state the following:
The probability of failure does not add. 15% a month does not mean 105% chance of failure in 7 months. You multiple them, specifically you multiply (1-.15)^N where N is the number of months. That is the probability of no loss. This assumes the probability is stable, and the next month does not depend on the previous month.
If you need to calculate the distribution of failures, it follows the Geometric Distribution with p = 0.004 or p = .15 depending on the case.
If this is going to be run until failure, then what is interesting is the expected longterm results (plus other things). That expected longterm result follows the formula:
E[A] = SUM FROM 1 to INFINITY (((.06 * I) - 1)*(.96)^I*(.04)) E[B] = SUM FROM 1 to INFINITY (((.20 * I) - 1)*(.85)^I*(.15))
My own quick calculations show:
The expected longterm return for A is approximately 37.4%. The expected longterm return for B is approximately 28.3%.
I will recheck those calculations later when I have had my daily tea.
- Lexander Morinex
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Professor Bunsen
Optech Scientific
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Posted - 2008.12.23 19:17:00 -
[19]
Edited by: Professor Bunsen on 23/12/2008 19:18:58 It's not a pyramid or anything dodgy. In fact its not anything right now, just wanted feedback before I got too far down a thought process. As noted above if the bond failure event occurs bond investors will lose the capital. Thats not scheme failure or scam, just a recognition that bond failure event will (probably) occur.
It seems bond A would fly, bond B less certain to sell. I may have to tweek my profit/risk offering.
Lex, I would be grateful to chat to you in game, I'll drop you a convo [Eve-Index][Traded Mineral Options Tutorial] |

Nahkep Narmelion
Gallente Center for Advanced Studies
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Posted - 2008.12.23 19:22:00 -
[20]
Originally by: Ambo
It seems that this is essentially a gamble.
Welcome to the wonderful world of financial markets, you now understand their fundamentals. 
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Lexander Talonix
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Posted - 2008.12.23 19:55:00 -
[21]
Originally by: Professor Bunsen Edited by: Professor Bunsen on 23/12/2008 19:18:58 It's not a pyramid or anything dodgy. In fact its not anything right now, just wanted feedback before I got too far down a thought process. As noted above if the bond failure event occurs bond investors will lose the capital. Thats not scheme failure or scam, just a recognition that bond failure event will (probably) occur.
It seems bond A would fly, bond B less certain to sell. I may have to tweek my profit/risk offering.
Lex, I would be grateful to chat to you in game, I'll drop you a convo
I would have no problem. One issue that I didn't address is that this assumes a constant hazard, but I would argue the hazard function should be more bathtub, reflecting the initial potential for scam/failure and the ever increasing potential that the chance of failure will increase due to outside factors. Total loss of capital is too extreme a model too.
I have done some modeling on my own of failure predictions for Stocks/Bonds. The overall situation is really pretty ugly.
- Lexander Morinex
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Ambo
State Protectorate
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Posted - 2008.12.23 21:44:00 -
[22]
Originally by: Nahkep Narmelion
Originally by: Ambo
It seems that this is essentially a gamble.
Welcome to the wonderful world of financial markets, you now understand their fundamentals. 
lol. Touche.  --------------------------------------
Trader? Investor? Just want to track your finances? Check out EMMA |

Lexander Morinex
Caldari LDD Investments
|
Posted - 2008.12.24 15:59:00 -
[23]
Originally by: Lexander Morinex
E[A] = SUM FROM 1 to INFINITY (((.06 * I) - 1)*(.96)^I*(.04)) E[B] = SUM FROM 1 to INFINITY (((.20 * I) - 1)*(.85)^I*(.15))
The expected longterm return for A is approximately 33.4%. The expected longterm return for B is approximately 13.3%.
Interestingly, nobody caught my error on this one, but I felt I should correct it. The formula for Bond A above was using a 4% failure rate, not a 0.4% failure rate.
Corrected, the new formula shows that Bond A does MUCH better. Namely, it has an expected return of over 1260%. But that include a lot of very unlikely situations such as the game still being a factor in 80 years! More reasonable is the fact that the bond is very likely to return a positive amount and is more limited by the limits of the real world than anything ingame.
My only issue is the idea that the failure rate is really 0.4%. I think that is too low, and it certainly suggests that Bond A is MUCH, MUCH better than Bond B.
- Lexander Morinex
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Handelsschnucki
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Posted - 2008.12.24 22:27:00 -
[24]
If I understood you right you are trying to soothe investors minds by saying 100% of the money will be locked away safely but if you fail for whatever reasons you might claim all the money?
That boils down to no safety at all.
On the other hand I will suggest a more trusting and fascinating way for all your potential investors! We tell you the amount of isk we're willing to invest and you go on gamble with that. Everyone will hold their share of isk locked away safely until the outcome is decided! 
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Packtu'sa
Nabaal Construction and Industrials Corp
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Posted - 2008.12.24 22:37:00 -
[25]
This isn't a bond, or even an investment opportunity. It's a lottery, and advertising it as anything else is misleading. A bond or other investment does everything it can to prevent failure; it never says "well, if this happens, then maybe I'll just keep all the money".
If you create a lottery game and market it as such, there are certainly those in EVE who will buy in, but this is the wrong place to be advertising it.
Packtu'sa Founder/CEO, Nabaal Construction and Industrials Corp (2bn @ 4.5%) |

Kazzac Elentria
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Posted - 2008.12.25 05:00:00 -
[26]
Originally by: Packtu'sa This isn't a bond, or even an investment opportunity. It's a lottery, and advertising it as anything else is misleading. A bond or other investment does everything it can to prevent failure; it never says "well, if this happens, then maybe I'll just keep all the money".
If you create a lottery game and market it as such, there are certainly those in EVE who will buy in, but this is the wrong place to be advertising it.
Not necessarily, I've been toying with the idea of running a lottery based off of Powerball for a little while now.
Just trying to work through the security details is more the issue at this point. |

Assistant Beaker
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Posted - 2008.12.25 05:01:00 -
[27]
Just poasting in this thread to say I missed you, Bunsen.  |

Packtu'sa
Nabaal Construction and Industrials Corp
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Posted - 2008.12.25 06:22:00 -
[28]
Originally by: Kazzac Elentria Not necessarily, I've been toying with the idea of running a lottery based off of Powerball for a little while now.
That's still nothing new to EVE. A legitimate idea, yes, but it doesn't belong in Market Discussions in my opinion. It's like a stock broker trying to sell lottery tickets.
Packtu'sa Founder/CEO, Nabaal Construction and Industrials Corp (2bn @ 4.5%) |

Hostility Incarnate
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Posted - 2008.12.25 17:03:00 -
[29]
Originally by: Kazzac Elentria Not necessarily, I've been toying with the idea of running a lottery based off of Powerball for a little while now.
quote=Packtu'sa]That's still nothing new to EVE. A legitimate idea, yes, but it doesn't belong in Market Discussions in my opinion. It's like a stock broker trying to sell lottery tickets. Discussion of opening up a lottery, designing one, running one, and all the assorted/associated details that go along with one is most definitely appropriate here. More so than many other threads.
Selling the tickets or running the lottery itself would not be appropriate here.
(Of course I could just call you elitist but that would be far too predictable/trolling. )
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Kazzac Elentria
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Posted - 2008.12.26 04:51:00 -
[30]
Originally by: Packtu'sa
Originally by: Kazzac Elentria Not necessarily, I've been toying with the idea of running a lottery based off of Powerball for a little while now.
That's still nothing new to EVE. A legitimate idea, yes, but it doesn't belong in Market Discussions in my opinion. It's like a stock broker trying to sell lottery tickets.
The actual selling yes, but the formation, regulation and security rules most assuredly lie here.
...but I prolly wont even bother and most likely take it all to the ebank forums for reading and review. |
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