dave2
Member of DD Central
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Post by dave2 on May 31, 2018 9:19:34 GMT
Leading to more howls of protest from GBBA lenders whose accounts are overweight in a loan now deemed ineligible ... Just because a loan is not currently eligible for the strict criteria required for the GBBA does not mean it is a bad loan, it just means that it is being sold and not currently purchased by the GBBA. The issue is that by Exchanging an eligible loan for an ineligible loans which is then sold, the rundown of the GBBA portfolio is seemingly hastened. Sounds like it should be a relatively simple fix - have the diversification algorithm only consider loans which are still eligible for the account, and/or skip over any that are ineligible.
Or only exchange Eligible for Eligible, and InEligible for InEligible loans.
Not that it really matters.
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sl75
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Post by sl75 on May 31, 2018 12:49:03 GMT
Leading to more howls of protest from GBBA lenders whose accounts are overweight in a loan now deemed ineligible ... That "can't happen" now... the initial rebalancing has been done, so nobody should be "overweight" compared to anyone else at the point the loan becomes ineligible. Once the loan becomes ineligible, everyone has about the same proportional amount already, and it's up to a different part of the system to share out the sales fairly [Edit: as I recall, it uses a different definition of "fair", leading to the perceived imbalances when considered by the loan unit swapping system's definition of "fair"] It also seems that the swapping puts more strain on the trading system - before swapping, some investors had already completely sold out of that loan, so do not need to be considered any further by the trading system, but after swapping, every single investor now has a part, and the trading system needs to consider all of them, making things go more slowly for everyone.
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SteveT
Member of DD Central
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Post by SteveT on May 31, 2018 12:56:26 GMT
Leading to more howls of protest from GBBA lenders whose accounts are overweight in a loan now deemed ineligible ... That "can't happen" now... the initial rebalancing has been done, so nobody should be "overweight" compared to anyone else at the point the loan becomes ineligible. True if lenders judge their weighting only against other GBBA lenders. But a good number seem to consider anything over 1% of their account total to be "overweight". Whilst new lenders can no longer join GBBA1, I understood the rebalancing algorithm was designed progressively to reduce GBBA2 lenders' exposure to any specific loan as further lenders joined / added funds. However, since I use neither GBBA account, I may have misunderstood.
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sl75
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Post by sl75 on Jun 7, 2018 13:05:07 GMT
I've noticed the same thing happening in the GEA, which is also actively selling some of the (presumably no longer eligible) loans, and then swapping the loans it doesn't want to sell for more units of the loans it does want to sell...
I've also realised in greater clarity WHY this is an unfair exchange. The automated agent has a clear preference ranking in normal operation:
Eligible loan units within diversification limits are preferred to cash (the account is actively trying to buy them)
Cash is preferred to ineligible loan units (the same account is actively trying to sell them).
This means that eligible loan units are actively preferred to ineligible ones.
For a fair exchange, each party to the trade receives something that they rank equal or higher to what they give in exchange.
The trade is unfair because the automated agent would prefer to keep the loan unit it is giving away compared to the one it receives.
The primary preferences (which loan units are preferred to cash) are being ignored and only the secondary preferences (all else being equal which loan units it would prefer to increase / decrease) considered.
Edit: it seems to me a better solution to the "problem" of some lenders being "overweight" in an ineligible loan (when the bug has been fixed and ineligible loans are ineligible for swapping too) would be to order the sales queue for loan units being sold by the GBBA / GEA / etc. by how "overweight" the given account is in that loan... so a lender who is withdrawing all their money and only one loan is left in their account (representing 100% of the investment) would be at the front of the sales queue for that loan, and a lender whose holding is less than a micropenny would be at the back of the sales queue.
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