3 ms·

Really cool! New startup idea: create a trading algorithm that acts as a market maker of reserved instances. You should probably be able to price the reserved i

by Yrlec 14y ago

Really cool! New startup idea: create a trading algorithm that acts as a market maker of reserved instances. You should probably be able to price the reserved instances pretty much like bonds, if you compare it to the on-demand instances. You lock your money for a while but you get some yield in return.

cperciva 14y ago
It's a bit more complicated than that -- RIs are bonds with unknown future payouts (since the hourly prices drop from time to time) and a very high transaction cost (AWS takes a 12% cut each time an RI is sold).
- Yrlec 14y ago
  Sure, but you could perhaps model that as some form of default risk. Real bonds also have a risk of not returning the yield they're supposed to return (just look at Greece). Also, if they add support for getting paid in AWS-credits, I'm sure they'd be able to lower the transaction-fee.
  - somic 14y ago
    I don't think RI is a bond. Bond is a debt instrument and you don't loan anything to AWS when you purchase an RI. RI is a hedging instrument instead - you think that if you end up running an instance non-stop or near-non-stop, you are hedging against paying a full price. Hence, RI is more like an option. Further parallels with options are: 1) your upfront payment is option premium; 2) your RI has time value which is always declining as time passes; 3) RI gives you a right, not obligation, to do something; 4) RIs have many series, each expiring at the same time, just like exchange-traded options that expire at predetermined times. All in all, this is huge. Or even bigger than huge. It can enable certain things that were not possible before, and personally I am very excited about opportunities it will present and how it will re-shape public IaaS.
BadassFractal 14y ago
It's already being done by a startup I know, I think they might still be in stealth though.
- somic 14y ago
  Until this announcement, trading (buying and selling) of any EC2 entity was theoretically impossible. Many companies claim to be working on things like marketplaces etc, but unless you can sell (buying is always trivial) and further unless you can sell to not just AWS but to a pool of other users, it ain't no marketplace.
e-dard 14y ago
[mistake]

by Yrlec 14y ago

cperciva 14y ago

It's a bit more complicated than that -- RIs are bonds with unknown future payouts (since the hourly prices drop from time to time) and a very high transaction cost (AWS takes a 12% cut each time an RI is sold).

Yrlec 14y ago
Sure, but you could perhaps model that as some form of default risk. Real bonds also have a risk of not returning the yield they're supposed to return (just look at Greece). Also, if they add support for getting paid in AWS-credits, I'm sure they'd be able to lower the transaction-fee.
- somic 14y ago
  I don't think RI is a bond. Bond is a debt instrument and you don't loan anything to AWS when you purchase an RI. RI is a hedging instrument instead - you think that if you end up running an instance non-stop or near-non-stop, you are hedging against paying a full price. Hence, RI is more like an option. Further parallels with options are: 1) your upfront payment is option premium; 2) your RI has time value which is always declining as time passes; 3) RI gives you a right, not obligation, to do something; 4) RIs have many series, each expiring at the same time, just like exchange-traded options that expire at predetermined times. All in all, this is huge. Or even bigger than huge. It can enable certain things that were not possible before, and personally I am very excited about opportunities it will present and how it will re-shape public IaaS.

BadassFractal 14y ago

It's already being done by a startup I know, I think they might still be in stealth though.

somic 14y ago
Until this announcement, trading (buying and selling) of any EC2 entity was theoretically impossible. Many companies claim to be working on things like marketplaces etc, but unless you can sell (buying is always trivial) and further unless you can sell to not just AWS but to a pool of other users, it ain't no marketplace.

e-dard 14y ago

[mistake]