Ideosphere Forum

Re: fx-discuss: Re: if-discuss: too many Claims?

Author: Dave Steele
Conversation: if-discuss: too many Claims? ( prev | next ) reply!
Topic: fx-discuss ( prev | next )
Date: Mon Jul 22, 1996 03:38 pm
James Jones
Dave Steele




>On Mon, 22 Jul 1996, Dave Steele wrote:
>
>> >The trouble is, what happens if the "right" bid/ask contains a wide
>> >spread?...
>
>>...If you can find a way to increase the
>> ratio of trading to the number of issues traded, then the spread should
>> narrow.
>
>Not necessarily. [...] people won't invest in a claim which can
>only barely beat a riskless investment;
>...If the "real" price
>falls in one of these regimes, no trades should be taking place,
>regardless of the density of the market.
>

Well... OK. But only if there is there is general agreement on the 'real'
price. If it is under contention, then the spread will still narrow.

>> >...One further possible change
>> >that could be made would be to make the prices finer by adding decimal
>> >places...
>> You've said that before, and I don't understand your reasoning.
>>
>> Is it simply because the resolution is too course? The difference in your
>> example is a payoff of 20:1 vs 17:1. How much more accurately can you
>> predict?
>
>The reasoning is basically that the resolution is too coarse, yes.
>Remember, to make trades you must have both a buyer and a seller; the
>potential gain for the SELLER in my example is 5.26% vs. 5.81%, definitely
>big enough to matter...

OK. I hadn't considered ROI on lenger-term issues. I'm not that far along yet.

>How can the system
>avoid the problem of overloading in a real-money environment, unless there
>is claim oversight? It would seem easy to generate any number of identical
>claims for the express purpose of diluting liquidity in a particular issue
>that someone had a vested interest in obfuscating.
>

Robin's answer to this would be market-based - a third party filtering
service. Such a step has been hampered (as have many things) by the
Transaction Form. With the impending move to FX (just what are the facts
here?), such a service may be more viable.

>From the IF home page:

--------------------
Important Notice!

Idea Futures is closing down. It will probably be completely gone by August
31, 1996. Please check
out the Foresight Exchange.
--------------------

Foresight makes no mention of IF.

-----
Dave Steele daves@xetron.com
Xetron Corp.
460 W. Crescentville Road
Cincinnati, Ohio 45246
http://www.xetron.com/


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