Thursday, June 22, 2017

Mechanics of NGDP betting queues

My version has two queues, one to remove a bet and one to add a bet.  The trading bots are betting the mean value of NGDP when the pit boss declares mean to variance in spec and presses the bets.

In this scenario the even money bot is simple.  When it is your turn to remove, do so if your current bet is more than one tradebook uncertainty from the current mean.  Then on the add queue, bet the current mean. Your bot trader will always be within one tradebook uncertainty of inflation free cash.

This is a cascaded market structure ordered by  significance.  The congestion is ex post, in the payoffs. The central bank has to pay off some 6 billion betters and thus needs some digits stored around the world else the money network actually congests, like bitcoin does.  But payout ledger fees may be possible, ex post.  So here is always a quantization noise gap once the bets are pressed and the proper mean to variance will not appear again until the bets clear.

Finance, it just measures empty space in the basket brigade and charges us for it.

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