cooling_dude
Bye Bye's for the PPI
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Post by cooling_dude on Feb 25, 2016 14:13:37 GMT
I was going to make the very same suggestion, but you beat me to it. This would be the best of both worlds. That wouldn't work for loans of less than £2M, since the current rules would allocate both parts via the bottom-up method. Absolutely; I'm no big hitter either, and there is no doubt that the "bottoms up" system for the entire loan would benefit anyone with less than £100,000 invested in SS. However, we want to keep the Big Hitters happy, as they are the guys bring stability to the platform. I think the advantage/disadvantage point is a lot lower than £100k. Think about PBL081. £2.975M spread among 1500 investors is an average of £2k each, so with a range of pre-funding requests bottom-up might have resulted in a maximum allocation of £4-5k. Anyone setting their pre-fund at £10k would have been allocated that same amount based on the actual 45% allocation factor, so anyone with a pre-fund greater than £10k would be allocated more via the percentage method than they would via bottom-up. That was a little typo; I did in fact mean 10k 
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webwiz
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Post by webwiz on Feb 25, 2016 15:06:32 GMT
The split loan idea could be done with or without program changes. My first idea, which would involve changes, was that the first £1m was allocated entirely on a bottom up basis so that anyone bidding too much would get nothing from that tranche but would participate in the second, larger, tranche on a proportional basis. Another way of looking at it is only one tranche but the first £1m of it is allocated bottom up and the remainder proportionately. Alternatively the loan could simply be split into two as duncandive suggests and allocated as at present, so no programming needed, but unless lenders were restricted to one tranche (programming required) I don't think this would be as effective in discouraging gaming.
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webwiz
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Post by webwiz on Feb 25, 2016 15:11:25 GMT
This is already arguably the most complex part of SS.... Please don't make it more complicated still! I sympathise with your view but unless gaming is brought under control prefunding will collapse IMO, and I see no way of doing this without some extra complexity (except the obvious but unpopular idea of abolishing INPL.)
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cooling_dude
Bye Bye's for the PPI
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Post by cooling_dude on Feb 25, 2016 15:18:26 GMT
This is already arguably the most complex part of SS.... Please don't make it more complicated still! I sympathise with your view but unless gaming is brought under control prefunding will collapse IMO, and I see no way of doing this without some extra complexity (except the obvious but unpopular idea of abolishing INPL.) I don't disagree that it would be nice to see a change with pre-funding allocation; but do you not think that if gaming was eradicated (by which method, I do not know), the pre-funding model would currently be acceptable. So if every investor asked exsacly what they wanted, the current system work fine? It seems to me some are taking the "gaming" discussion, and trying to use it to change the pre-funding model because they feel it is not financially benefiting them as much as they would like.....
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webwiz
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Post by webwiz on Feb 25, 2016 16:00:55 GMT
I sympathise with your view but unless gaming is brought under control prefunding will collapse IMO, and I see no way of doing this without some extra complexity (except the obvious but unpopular idea of abolishing INPL.) I don't disagree that it would be nice to see a change with pre-funding allocation; but do you not think that if gaming was eradicated (by which method, I do not know), the pre-funding model would currently be acceptable. So if every investor asked exsacly what they wanted, the current system work fine? It seems to me some are taking the "gaming" discussion, and trying to use it to change the pre-funding model because they feel it is not financially benefiting them as much as they would like..... Absolutely. Pre-funding is great. Those of us who were players before it was introduced will I suspect be unanimous on that. I voted for it as the best innovation of 2015. However it does not fit well with INPL which although useful is of much less value than prefunding, and so is susceptible to gaming.
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mikes1531
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Post by mikes1531 on Feb 25, 2016 17:12:46 GMT
The split loan idea could be done with or without program changes. My first idea, which would involve changes, was that the first £1m was allocated entirely on a bottom up basis so that anyone bidding too much would get nothing from that tranche but would participate in the second, larger, tranche on a proportional basis. ISTM that there are cases where this wouldn't work. Consider a £1.8M loan. After the bottom-up allocation of the first £1M, the "second, larger, tranche" actually would be the smaller tranche. And the discontinuity/inconsistency I described in my earlier message would be even more unacceptable for a £1.8M loan than it would be for the £2M loan I used as my example. Alternatively the loan could simply be split into two as duncandive suggests and allocated as at present, so no programming needed... : I've made this point before, but I don't think anyone has responded to clear up my confusion, so I'm trying again... Any loan £2M or smaller would end up split into two parts which each were no larger than £1M. If both were "allocated as at present" both would be allocated bottom-up. So I don't see why no programming would be needed. Please explain.
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webwiz
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Post by webwiz on Feb 25, 2016 21:12:57 GMT
webwiz : I've made this point before, but I don't think anyone has responded to clear up my confusion, so I'm trying again... Any loan £2M or smaller would end up split into two parts which each were no larger than £1M. If both were "allocated as at present" both would be allocated bottom-up. So I don't see why no programming would be needed. Please explain. True, but if you go back to my OP you will see that the split would only happen on loans >£2m. Loans up to £2m would be allocated as at present (in one of two ways). BTW the £1m and £2m numbers are just illustrative. SS could choose numbers they thought was suitable, and it might vary from loan to loan, but in the discussions on this thread we have used £1m and £2m for the sake of argument.
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Post by GSV3MIaC on Feb 25, 2016 21:54:24 GMT
I'd just allocate the first £1m bottom up (everyone gets a share, which with 2k investors means £500 minimum) and any extra demands get allocated on % basis. As SL75 said, there is some scope for gaming by signing up your dog, but rather minor.
In the absence of any input from SS I went and modelled what a pareto distributed bidding audience looks like, and what would have happened to them in a 'completely bottom up' scenario on PBL081. Apologies for slow output but Western Power had me turned off today, (tree trimming) which resulted in one dead PC (CMOS battery died, which you only discover with no mains power for 8 hours) and another dead PC (trashed partition table, thanks to power off during Win7 updates). Oh joy,
Anyway ... (I assume the formatting will get trashed. It started life as a table)
"
Investors:1639
Total Request: £6,611,100
Avg Request: £4,000"
"Investors:1049
Total Request: £264,400
Avg Request: £300
Got: £135" .. bottom up would have got £300
"Investors:378
Total Request: £251,900
Avg Request: £700
Got: £315" .. bottom up would have got £700
"Investors:136
Total Request: £241,300
Avg Request: £1,800
Got: £810" .. bottom up would have got £1,800
"Investors:49
Total Request: £231,500
Avg Request: £4,700
Got: £2,115".. bottom up would have got £4,700
"Investors:17
Total Request: £222,300
Avg Request: £13,100
Got: £5,895" .. bottom up would have got£13,100
"Investors:6
Total Request: £213,400
Avg Request: £35,600
Got: £16,020".. bottom up would have got £35,600
"Investors:4
Total Request: £5,120,400
Avg Request: £1,280,100
Got: £576,045".. bottom up would have got £370,175
As you can see, the 4 BHs at the end are the ones that get caned. How much less caned they'd get if the 'requests' had not been 2x-3x gamed, we can only guess. With 'first million bottom up' the damage is rather less. This is theoretical; only SS know if there are 4 BHs at a half million, or 10 at a quarter, or something less pointed. It's certainly not a normal distribution about the mean.
Nobody knows how much gaming goes on, and I can't even remember if there is a cap on BH bidding (maybe half a million is not allowed, never mind the million plus bid)
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ben
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Post by ben on Feb 25, 2016 22:03:30 GMT
during the one around xmas someone acidentally brought 800,000 so must not be a limit or a 1,000,000 if there is
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Post by GSV3MIaC on Feb 25, 2016 22:06:15 GMT
That was on the SM though, not at prefunding stage.
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cooling_dude
Bye Bye's for the PPI
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Post by cooling_dude on Feb 25, 2016 22:07:46 GMT
I'd just allocate the first £1m bottom up (everyone gets a share, which with 2k investors means £500 minimum) and any extra demands get allocated on % basis. As SL75 said, there is some scope for gaming by signing up your dog, but rather minor. In the absence of any input from SS I went and modelled what a pareto distributed bidding audience looks like, and what would have happened to them in a 'completely bottom up' scenario on PBL081. Apologies for slow output but Western Power had me turned off today, (tree trimming) which resulted in one dead PC (CMOS battery died, which you only discover with no mains power for 8 hours) and another dead PC (trashed partition table, thanks to power off during Win7 updates). Oh joy, Anyway ... (I assume the formatting will get trashed. It started life as a table) I wondered why the SM loans were hanging around for longer today....... did your BOT enjoy his time off  Good post. I would like to see what would happen if SS tried to eradicate gaming before they change the allocation method. I think if everybody asked for what they actually wanted (in particular the BH) the current system would work just fine. If they did change the allocation, I think your figures show that SS would have to do it so that it didn't affect the BH, however once again we don't know how much gaming went on.
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ablender
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Post by ablender on Feb 26, 2016 6:33:33 GMT
It might be because my demands are not astronomical (<£1000/loan), but between the allocations I get on the PM and top-ups from the SM, I manage to get what I intended to lend. As such, I see this discussion a bit academic. (My opinion)
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adrianc
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Post by adrianc on Feb 26, 2016 8:27:19 GMT
It might be because my demands are not astronomical (<£1000/loan), but between the allocations I get on the PM and top-ups from the SM, I manage to get what I intended to lend. As such, I see this discussion a bit academic. (My opinion) Mostly, I'd agree. Some of the smaller loans - nope, not seen anything very much on the SM after the tidgy allocations. But with those loans - of course - there quite simply just ain't enough jam to spread thickly across everybody's bread.
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webwiz
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Post by webwiz on Feb 26, 2016 8:32:04 GMT
I would like to see what would happen if SS tried to eradicate gaming before they change the allocation method. I think if everybody asked for what the actually wanted (in particular the BH) the current system would work just fine. I agree. There is nothing wrong with the allocation method per se. My suggestion to tweak it is designed to discourage gaming, because the alternative of abolishing INPL is unpopular and I see no other way, but if SS can do it somehow that's fine.
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Post by GSV3MIaC on Feb 26, 2016 10:12:31 GMT
I think they already tweaked by limiting prefunding based on your account size, or 10k if larger, but minnows still need to game to avoid getting £45 when they wanted £100, or else play on the SM. Only 'no gaming' option I can think of which has not already been mooted is to use some lottery approach instead (hire ERNIE) .. basically you have a chance (roll a random number) of getting what you asked for .. select any one bidder, give them what they requested. Deduct from total, repeat (eliminating all bidders who could no longer be satisfied, because there is no enough left), repeat until nothing left. Mr 'I want it all' has about a 1/1600 chance of getting lucky (if they miss on round 1 they are out). Ms 'I just want £100 gov' would be in every selection round until the last, or until they got it. Nobody gets less than they asked for, unless 'less' is zero. Asking for too much just reduces your chance of getting any (and if you do get any, you'll get all of the too much). Ok Ok, enough blue sky already. 8>. p.s.in the interests of better modelling, can anyone tell me what the pre-fund steps are when you get past £100k, and whether there is actually a limit at £250k of prefund or if you can go higher if your portfolio is larger than that? (PM me if you don't want to publish!)( savingstream would presumably know?) |
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