Edited by: Mme Pinkerton on 07/07/2010 12:04:27
The following proposal is obviously lifted from RL practices but I cannot remember reading something similar on this forum.Setting:
There are 2 players
Player A: high reputation, lots of idle ISK, doesn't like to take risks, would like to get some return on his capital
Player B: unknown, lacking ISK, wants to do some market speculation
Player B thinks prices for Marauders are going to rise substantially during the next month. Sadly Marauders are rather expensive and he could only afford a small number of them on his own.
Player B asking Player A for a loan is out of question as Player A does not trust Player B to pay it back.
Instead Player A creates a Golem derivative for Player B:
First he looks at the price history and notices that Jita prices for Golems never changed by more than 18% within one month during the last year. In fact, price changes were mostly within the 4-12% bracket.
Player A comes to the conclusion that the price of Golems falling by more than 20% during the next month is extremely unlikely.t=0
(*) The current price of a Golem is 510m ISK.
(*) Player B deposits 102m ISK with Player A
(*) Player A simultaneously buys one Golem in Jitat=30
(*) Price for Golems has increased to 580m ISK
(*) Player A sells one Golem @ 580m ISK
(*) Player A pays 102m+70m = 172m ISK to Player B
(*) Price for Golems has stayed at 510m ISK
(*) Player A sells one Golem @ 510m ISK
(*) Player A pays 102m ISK to Player B
(*) Price for Golems has fallen to 450m ISK
(*) Player A sells one Golem @ 450m ISK
(*) Player A pays 102m - 60m = 62m ISK to Player B
(*) Price for Golems has fallen to 390m ISK
(*) Player A sells one Golem @ 390m ISK
(*) Player A pays nothing to Player B
(*) Player A takes a 510m - 390m - 102m = 18m ISK loss.
=> Player B can trade with 5x as many Golems as he could on his own
=> Player B is willing to pay Player A a fee for this advantage (I would propose flat fee in outcomes 2-4, percentage based fee in outcome 1).This has been omitted from the numbers above for the sake of simplicity.
=> Player A only loses money if prices fall lower than the Value at Risk which he determined at t=0 (408m ISK in this example).
Unless something extreme happens (-> s4) he should not be exposed to market risk at all.
=> Player A does not have to trust Player B with a loan (but Player B does have to trust Player A with some ISK).
edit: you are free to interpret this as my contribution to the "should EBANK engage in risky market speculations?" debate