Bond market

[greene345]

If I've got the money, I would love to be able to loan it to others. This could easily be achieved by a bond market. If I need to raise funds, I could list $10 billion in company bonds for sale, but I wouldn't get the money unless/until other companies bought my bonds. That would be the same if an AI needed cash they could list bonds and they wouldn't get the money unless another AI or the player or player's company bought the bonds.

A few things I want to add to this.

The player should be able to buy bonds from all companies including companies they hold stock. For example if my player has $10 billion and I really need it to float my company, I could list the bonds and then my player could buy them.

Bonds would grow in value over time, but bonds would also be gradually automatically cashed in. So the idea here is that if my player buys $10 billion in bonds from ABC Company, ABC Company's cash would be automatically going down by 1% of existing bonds and players money would be going up by 1% of the bonds they hold. At the same time, the value of existing bonds held would go up by a certain percentage the longer they are outstanding. The company should be able to buy back bonds at any time, for a 2% markup.

I think that the percent of "interest" on the bonds could be set by the company issuing them. Higher interest rates would lead to the bonds being bought quicker, but would cost more over time. Lower rates would lead to bonds sitting longer (or not being bought at all), but would cost the company less over time.

And I think I'm combining bonds with something else that I'm forgetting.

[Econ]

I think it seems like an interesting idea. As I don't have that much knowledge about economics, I'm open for new possibilities to make the game more realistic, and give it a higher learning value. Also, I had a small idea to add to yours; maybe a "rating" could be added to make it easier for the player to determine the interest rate for the bonds, if the player has the authority to choose it. As in, making a rating based on the ratio between the interest rate and the bond amount. I think it would make it easier for the developers as well for them to script the Al's interest in buying bonds.

[counting]

Rating is not positive related to the interest. Basic bond has a face value and fixed interest pay rate, what's changing is on secondary market, when buying and selling bonds the market value changes, thus the real interest rate (the yield) changes along with it. Rating is about the risk involved (able to pay in due) and the quantity they are traded on the market (liquidity), so generally speaking the more a bond is traded, the higher the price, hence the lower the yield (for buyers).

Imaging a company-A issuing 10,000 10 years bonds at $1000 with interest 10%, would be like selling a "bond product" of 10,000 pieces at the price of $1000, but have to pay $100 per year per piece. A person or a company "B" can buy the "bond product" directly from company-A (the primary market), but bonds can also be resold. "B" can sell the "bond product" to another entity "C" (at the secondary market), usually at a higher price say $1250 a piece, then the yield goes down to 8% ($100/$1250) for "C" ("B" essentially giving up the interest in the future for a quick cash now). However say if "C" have already collecting say 6 turns of interest ($600) and thinks the market rating of this bond will be lower in the future (risk higher, less liquidity), "C" may want to sell the bond at $800 (yield goes up to 12.5%), since "C" bought with $1250, so it gained total $800+$600 with net ($800+$600-$1250)=$150. Say the buyer of this $800 bond "D" is looking for a long-turn cheap investment, and willing to take the risk of holding this bond till redeemed, hence after 4 turns the company-A redeem this bond from "D", and paid back at $1000 price plus the remaining 4 turns of interest ($400).

All in all the above transaction let company-A gathered $1000*10,000 of total 10m fund at the time of issuing. "B" gained $250*10,000 of total 2.5m when reselling. "C" gained $150*10,1000 of total 1.5m in 6 turns of interests and selling-back. And "D" gained the redeemed $10m plus 4 turns of interest $400*10,000 = 4m, minus 8m, total 10m+4m-8m = 6m. In the end, company-A paid 10 years of $100*10*10,000 = 10m in interest, and redeemed using another 10m. (Notice interest rate floating with market value, the "yield" changes from 10%->8%->12.5%, at the beginning rating is high, price is high, interest rate is low, and in the end rating low, price low, and interest rate is high)

This is the fundamental for most financial market, where you have primary markets and secondary markets, and it's how interest rate and the cost of capital floating with bond markets. (Although the real financial market is much complicated than what I described above, like redeemable at full, callable, floating interest, etc, but the general idea is the same).

If I would design a bond market mechanism, I'll probably try to re-use the current "factory model" for producing "bond products", and sell them using modified "retail model", where nameless general, or AI-entities, person of corporate can buy the "bond products". Issuing company can also buy them back outstanding "bond products" with another modified "warehouse-cross-retail-like firm" (also act as secondary market if not selling/buying your own "bond products")

[Arcnor]

I've always wanted to see a bond market come into play, especially when I have tons of extra cash.

Right now you can take out a loan when the market is down at a low rate, but there is no way to get a fixed rate. In the real world a company would want a fixed rate as soon as rates started to increase.