Friday, August 10, 2007

The role of financial instruments in the success of the SLex endeavours

Tiana mentions with regards to cookies, that for successful SLex there need to be bonds. So, bonds, bonds... ok google. wikipedia. Let's see what we have:

Issuing bonds

Bonds are issued by public authorities, credit institutions, companies and supranational institutions in the primary markets. The most common process of issuing bonds is through underwriting. In underwriting, one or more securities firms or banks, forming a syndicate, buy an entire issue of bonds from an issuer and re-sell them to investors.

Ahhah. Now I understand why Veyron is so persistent about branding - since it is an essential part of getting the bonds. Ok. Point noted. We'll need to talk with Vint about that.

Now, lets see what kind of dishes do we have on the menu...

Types of bond

Fixed rate bonds have a coupon that remains constant throughout the life of the bond. Nah, that won't fit. I think both me and Vint would prefer the things to develop. Standing still is not for us.

Floating rate notes (FRN's) have a coupon that is linked to a money market index. With the latest news in the SL economy this is definitely something we want to avoid.

High yield bonds are bonds that are rated below investment grade by the credit rating agencies. As these bonds are relatively risky, investors expect to earn a higher yield. These bonds are also called junk bonds. I like the high yield part, but severely dislike the naming - don't think Vint will like us to have junk bonds, and me neither.

Zero coupon bonds do not pay any interest. Ok, then it is not interesting.

Inflation linked bonds, in which the principal amount is indexed to inflation. The interest rate is lower than for fixed rate bonds with a comparable maturity. However, as the principal amount grows, the payments increase with inflation. Ahha. Ok, I take it that the bigger Xcite thing I'd have, the better they are. Ok, let's put this on the candidate list, I'll see what I can arrange with the Xcite. Maybe custom build or something. Or if the quantity helps as well, maybe should script it to be self-replicating... Need to be careful so as not to get into the griefers list.

Asset-backed securities are bonds whose interest and principal payments are backed by underlying cash flows from other assets. Ok, this does suggest some kind of extreme polygamy. *strikes over, off the list*

Subordinated bonds are those that have a lower priority than other bonds of the issuer in case of liquidation. No, not the BDSM. /me thinks the freedom is one of the very precious values.

Perpetual bonds are also often called perpetuities. They have no maturity date. Argh. "And they lived happily ever after. But since no maturity date was reached, no SLex". So these won't work for sure. Sounded quite rosy at first though.

Bearer bond is an official certificate issued without a named holder. This does sound like it would be perfect for the random SLex with the strangers, hence would not work.

Registered bond is a bond whose ownership (and any subsequent purchaser) is recorded by the issuer, or by a transfer agent. As Looker has previously noted, this is not a profitable exercise. L$15 is not much, but with our modest incomes, it is still a visible sum of money.

Municipal bond is a bond issued by a state, U.S. Territory, city, local government, or their agencies. This one sounds a bit like the previous one, but if possible, I think I will avoid the governmental involvement.

Book-entry bond is a bond that does not have a paper certificate. Hence, I figure it would be stored somewhere online. Interesting concept. Let's leave it on the list.

Lottery bond is a bond issued by a state, usually a European state. Again - probably means more taxes or such. *writes off the list*

War bond is a bond issued by a country to fund a war. Well, Vint does have guns, so we could probably find a use for this one if we go to shoot, for whatever reason.

So, what are we left with, after the pre-evaluation ?

- Inflation linked bonds
- Book-entry bond
- War bond

Ok, so I think I will opt for the Inflation linked book-entry bond, with an option to be supplemented by the war bond. Hopefully Vint is ok with that choice.

*writes down: visit Xcite and check with them about the sizes*


vint falken said...

Oh, god. That much to choose from. *totally confused*

Dalien said...

In the end there are only three left, which I combined :-)

So if you are ok with my overview, can just take a look at the result :)

tiana meriman said...

well that was quite informative ^^ thank you for all those information, i trust this information will be very useful for when you and vint finally decide to make it official and you want to move in together ^^

Dalien said...

:-) sorry I could not help, it was just too tempting :)

official: how ? binding agreements and SLsignatures and such ? :)

Veyron Supercharge said...

Dalien, feel free to come over to my place anytime to get branded....

BTW, you're using the wrong URL....

Oh, and I suppose I should try to get into this OpenSIM thing.