[MPEx] CDO roll call for bond issuers

[MPOE-PR]

This is a little complex, so pour yourself a cup of coffee and take a comfy seat.

A CDO is basically an arrangement that works as follows : an issuer (I) takes a pile of debt of various entities (D1...Dn) in set ammounts (Q1...Qn) and piles it all together. The pile is then tranched, which means say that 25% of it goes to class A, which gets pA, 35% goes to class B, which gets pB and the remainder 40% goes to class C, which gets pC. The catch is that with respect to capital, class A gets paid first. If and only if there's anything left, class B gets paid. If after all B is satisfied there's anything left over, class C gets paid. The counter-catch is that pC is significantly above pA.

Now let's work this out with an example.

MPEx takes in 1000 BTC of debt from entity D1, which pays a weekly 15% ; 500 BTC of debt from entity D2, which pays a weekly 12% ; 1500 BTC of debt from entity D3, which pays 11.5% and 2000 BTC debt from entity D4, which pays 10%, and bundles it all into a CDO. The total weekly revenue of this CDO is 1000×.15+500×.12+1500×.115+2000×.1 = 582.5 BTC, and the total capital in the CDO is 5000 BTC.

The CDO is now tranched, as follows : 1250 shares class A, which pay 7% per month, 1750 shares class B, which pay 11% per month, and 2000 shares class C, which pay 15.125%.

In the event all four entities remain solvent, the class C realises a 15.125% interest, which is superior both in ammount and as principal to the 1k @15% available from entity D1.

In the event any entity goes bankrupt, the CDO plays out as follows :
class A is due 1250 in principal and 87.5 interest = 1337.5 BTC.
class B is due 1750 in principal and 192.5 interest = 1942.5 BTC
class C is due 2000 in principal and 302.5 interest = 2302.5 BTC.

Should entity D2 have gone bankrupt, the total value of the CDO is now 1150 + 0 + 1672.5 + 2200 = 5022.5. This means that class A receives its 1337.5 BTC in full, and there's 3685 left over. Class B receives its 1942.5 BTC in full, and there's 1752.5 left over, so class C realises a 24% theoretical loss or 13% practical loss (principal only).

Should entities D2 and D4 have gone bankrupt, the total value of the CDO remains 1150 + 0 + 1672.5 + 0 = 2822.5 BTC, thus class A receives its 1337.5 in full, class B receives 1485 on its 1942.5 claim and class C realises a 100% loss.

The advantages of the CDO are then apparent : class A obtains excellent security (it loses no money even if half the debtors default) for a small interest, whereas class C obtains better interest than available in the market, in exchange for footing the risk.

Obviously, the actual % wouldn't be the ones quoted, this was just a numeric example.

So now, given that MPEx is considering creating a CDO of this sort, which lenders here would be interested to participate ? (Obviously people with a track record, good ratings etc).

Thanks for reading !

[1714027389]

1714027389

[1714027389]

1714027389

[MPOE-PR]

Interesting, but will MPEx ever have an interface vaguely understandable by mere mortals ?

 

There are a couple of people that started work on making brokers for MPEx, which will probably look a lot like the name-and-password site that people are used to. Untill then, consider maybe Azelphur's python script?

[MPOE-PR]

very bad for liquidity

PURE.SYNTH sold something like half of all the float PUREMINING even has. In a day or so. Methinks you're describing the unseen rhino.

[MPOE-PR]

Mkay, so I'm gathering we don't yet have the financial/intellectual wherewithal for CDOs in the community?

[vragnaroda]

Mkay, so I'm gathering we don't yet have the financial/intellectual wherewithal for CDOs in the community?

Well, probably not yet for most of the people hanging out on the forums, anyway.   I don't think it's far from being viable, yet, though.

[JusticeForYou]

This is a little complex, so pour yourself a cup of coffee and take a comfy seat.

A CDO is basically an arrangement that works as follows : an issuer (I) takes a pile of debt of various entities (D1...Dn) in set ammounts (Q1...Qn) and piles it all together. The pile is then tranched, which means say that 25% of it goes to class A, which gets pA, 35% goes to class B, which gets pB and the remainder 40% goes to class C, which gets pC. The catch is that with respect to capital, class A gets paid first. If and only if there's anything left, class B gets paid. If after all B is satisfied there's anything left over, class C gets paid. The counter-catch is that pC is significantly above pA.

Now let's work this out with an example.

MPEx takes in 1000 BTC of debt from entity D1, which pays a weekly 15% ; 500 BTC of debt from entity D2, which pays a weekly 12% ; 1500 BTC of debt from entity D3, which pays 11.5% and 2000 BTC debt from entity D4, which pays 10%, and bundles it all into a CDO. The total weekly revenue of this CDO is 1000×.15+500×.12+1500×.115+2000×.1 = 582.5 BTC, and the total capital in the CDO is 5000 BTC.

The CDO is now tranched, as follows : 1250 shares class A, which pay 7% per month, 1750 shares class B, which pay 11% per month, and 2000 shares class C, which pay 15.125%.

In the event all four entities remain solvent, the class C realises a 15.125% interest, which is superior both in ammount and as principal to the 1k @15% available from entity D1.

In the event any entity goes bankrupt, the CDO plays out as follows :
class A is due 1250 in principal and 87.5 interest = 1337.5 BTC.
class B is due 1750 in principal and 192.5 interest = 1942.5 BTC
class C is due 2000 in principal and 302.5 interest = 2302.5 BTC.

Should entity D2 have gone bankrupt, the total value of the CDO is now 1150 + 0 + 1672.5 + 2200 = 5022.5. This means that class A receives its 1337.5 BTC in full, and there's 3685 left over. Class B receives its 1942.5 BTC in full, and there's 1752.5 left over, so class C realises a 24% theoretical loss or 13% practical loss (principal only).

Should entities D2 and D4 have gone bankrupt, the total value of the CDO remains 1150 + 0 + 1672.5 + 0 = 2822.5 BTC, thus class A receives its 1337.5 in full, class B receives 1485 on its 1942.5 claim and class C realises a 100% loss.

The advantages of the CDO are then apparent : class A obtains excellent security (it loses no money even if half the debtors default) for a small interest, whereas class C obtains better interest than available in the market, in exchange for footing the risk.

Obviously, the actual % wouldn't be the ones quoted, this was just a numeric example.

So now, given that MPEx is considering creating a CDO of this sort, which lenders here would be interested to participate ? (Obviously people with a track record, good ratings etc).

Thanks for reading !

Disclaimer:
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What's a CDO?

[MPOE-PR]

What's a CDO?

Is this dog?

[dog]

What's a CDO?

Is this dog?

Yes, this is dog.

[RaggedMonk]

Sounds interesting.  Watching.

[MPOE-PR]

Yes, this is dog.

Ahahah dude, post an address, you get 0.1337 coins of leetness.

[MPOE-PR]

This has finally happened. Here's the contract:

Code:

-----BEGIN PGP SIGNED MESSAGE----- 
Hash: SHA1 

MPCD.x is a tranched CDO composed of the following assets : 

i. 500 BTC to be invested in MPOE bonds starting the 1st of September for an asking rate of 4.99999999% a month (MPOE pays not on calendar months but on last-Friday-of-each-month) ; 
ii. 500 BTC invested with Patrick Harnett's 1% a week compounding bond offering (the line PsHCai6pF2UH1475 500.9815 in the most recent stats update reflects this investment) ; 
iii. 100 BTC invested with usagi's NYAN.A asset. 

The theoretical monthly yields of these investments are as follows : 

i. 500 * 4.99999999% = 24.99999995 BTC ; 
ii. 500 * 4.4061192% (1% per week, thus (1.01^52)^(1÷12)) = 22.03059600 BTC ; 
iii. 100 * 4.4061192% (1% per week, thus (1.01^52)^(1÷12)) = 4.40611920 BTC ; 
Total : 51.43671515 BTC 

This CDO is tranched as follows : 

MPCD.A, 350 BTC paid 2% per month (1.02^12 = 26.8% apr) = 7 BTC ; 
MPCD.B, 400 BTC paid 3% per month (1.03^12 = 42.6% apr) = 12 BTC ; 
MPCD.C, 350 BTC paid 9.2676329% per month (1.092676329^12 = 189.6% apr) = 32.43671515 BTC; 
Total : 51.43671515 BTC. 

Each tranche will consist of shares nominally worth 0.001 BTC, so 350`000 shares for MPCD.A and MPCD.C, and 400`000 shares for MPCD.B. 

This asset is created today, 15th of August 2012, will pay dividends on the 1st of each subsequent month for three months (that is, 1st of September, 1st of October, 1st of November) and then dissolve on the 1st of November. On each of the three dividend dates the exact sums quoted above will pe paid. On the last dividend date, all the remainder capital will be paid out, as follows : 350 BTC to MPCD.A holders. If less than 350 BTC capital remains the payment will be pro-rated (each holder gets his (shares / total shares) * remainder capital). Then, 400 BTC to MPCD.B holders. If less than 400 BTC capital remains the payment will be pro-rated (each holder gets his (shares / total shares) * remainder capital). Then, 350 BTC to MPCD.C holders. If less than 350 BTC capital remains the payment will be pro-rated (each holder gets his (shares / total shares) * remainder capital). 

The fund has a little head start (because the investment with Patrick Harnett is already ongoing) which I am generously donating to smooth things over. The NYAN.A investment will also be realised as soon as deposits confirm. 

Please bear in mind that the MPCD.C asset implies significant risk, no matter how attractive the >9% monthly interest might look. In case anything whatsoever goes bust the .C capital is first in line to pay for it. Other than defaults in any of the assets such loss could occur by the MPOE bond failing to activate (if sufficient capital is offered at a lower than the quoted rate the bond will lay fallow). 
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Link

[ciuciu]

Hey Mircea, will you care to ID yourself to a trusted forum member?
We have had some scammers lately and we would like to avoid troubles.

Thank you.

[Bitcoin Oz]

This is similar to NYAN on glbse.

https://bitcointalk.org/index.php?topic=97178.0

What are the "debts" you are selling ?

[ciuciu]

This is similar to NYAN on glbse.

https://bitcointalk.org/index.php?topic=97178.0

What are the "debts" you are selling ?

They both worked at Drexel Burnham Lambert. But it didn't end well.

[MPOE-PR]

@bitcoin.me NYAN seems to have some similarities to this, yes. Otherwise I'm not sure what you're asking?

@ciuciu Credentials are in the signature.

[ciuciu]

@bitcoin.me NYAN seems to have some similarities to this, yes. Otherwise I'm not sure what you're asking?

@ciuciu Credentials are in the signature.

You have 0 credentials. You just exchanged a few BTC to build some ratings. I would like to have some form of ID for more security, you can leave it with Kluge, it will be in good hands.
Something tells me you won't do it.

[ciuciu]

@bitcoin.me NYAN seems to have some similarities to this, yes. Otherwise I'm not sure what you're asking?

@ciuciu Credentials are in the signature.

You have 0 credentials. You just exchanged a few BTC to build some ratings. I would like to have some form of ID for more security, you can leave it with Kluge, it will be in good hands.
Something tells me you won't do it.

Can you explain why a porn website is hosted on the same domain as a BTC exchange?

(NSFW) http://polimedia.us/dtng/f/

http://polimedia.us/bitcoin/mpex.php

[vampire]

@bitcoin.me NYAN seems to have some similarities to this, yes. Otherwise I'm not sure what you're asking?

@ciuciu Credentials are in the signature.

You have 0 credentials. You just exchanged a few BTC to build some ratings. I would like to have some form of ID for more security, you can leave it with Kluge, it will be in good hands.
Something tells me you won't do it.

Can you explain why a porn website is hosted on the same domain as a BTC exchange?

(NSFW) http://polimedia.us/dtng/f/

http://polimedia.us/bitcoin/mpex.php

Supplemental income? She needs to make a buck somehow.

[ciuciu]

@bitcoin.me NYAN seems to have some similarities to this, yes. Otherwise I'm not sure what you're asking?

@ciuciu Credentials are in the signature.

You have 0 credentials. You just exchanged a few BTC to build some ratings. I would like to have some form of ID for more security, you can leave it with Kluge, it will be in good hands.
Something tells me you won't do it.

Can you explain why a porn website is hosted on the same domain as a BTC exchange?

(NSFW) http://polimedia.us/dtng/f/

http://polimedia.us/bitcoin/mpex.php

Supplemental income? She needs to make a buck somehow.

She asked for BTC to post pictures, but nobody took her offer because she is ugly.
https://bitcointalk.org/index.php?topic=74399.0
https://bitcointalk.org/index.php?topic=67535.msg862177#msg862177

[MPOE-PR]

Code:

-----BEGIN PGP SIGNED MESSAGE-----
Hash: SHA1

Starting capital : 1100 BTC.

Recovered capital : 453.2730665 BTC MPOE bonds ; 0 BTC NYAN.A ; 0 BTC Patrick Harnett
Received interest : 45 BTC MPOE bonds ; 6.5 BTC NYAN.A ; 15.753 BTC Patrick Harnett

Total recovered : 520.5260665 BTC

Paid :

MPCD.A 7 BTC x 3 = 21 BTC
MPCD.B 12 BTC x 3 = 36 BTC
MPCD.C 32.43671515 BTC BTC x 3 = 97.31014545 BTC

Total paid : 154.31014545 BTC.

Capital to be distributed : 520.5260665 BTC - 154.31014545 BTC = 366.21592105 BTC.

MPCD.C issue closed worthless ;
MPCD.B issue closed worth 16.21592105 BTC ;
MPCD.A issue closed untouched.
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These appalling results show the sad reality that outside of MPOE there isn't anyone or anything worth two shits in the BTC financial space. At any given point there's a large and vocal population of "trustworthy" nitwits that gleefully changes in composition each couple of weeks.

We won't be issuing another series for a while, nor will we be making further attempts to support seemingly "worthy" or "credible" "financiers" for a while, mostly because we're running out of quotes.