Prediction of Default Risk in Peer-to-Peer Lending Using Structured and Unstructured Data

2020 ◽  
Vol 31 (1) ◽  
pp. 115-129
Author(s):  
Jei Young Lee
Keyword(s):  
Interest Rates ◽  
Default Risk ◽  
Peer To Peer ◽  
Growth Potential ◽  
Unstructured Data ◽  
Loan Default ◽  
Market Opportunities ◽  
Default Rate ◽  
Loan Interest Rates ◽  
Using Data

Using data from Lending Club, we analyzed funded loans between 2012 and 2013, the default status of which were mostly known in 2018. Our results showed that both the borrower characteristics and the conditions of the loan were significantly associated with the loan default rate. Results also showed that the sentiment of a user-written loan description influenced the borrower's loan interest rates. It contributes to expanding the scope of peer-to-peer (P2P) loan research by implementing unstructured data as a new model variable. Financial counselors need to consider the growth potential of the P2P loan market using data analysis: This will reveal niche market opportunities, enabling the development of services necessary for the safe supply of small loans at reasonable interest rates.

Determinants of Treasury-LIBOR Swap Spreads

2005 ◽  
Vol 08 (04) ◽  
pp. 687-705 ◽  
Author(s):  
D. K. Malhotra ◽  
Vivek Bhargava ◽  
Mukesh Chaudhry
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Default Risk ◽  
Yield Curve ◽  
Short Term ◽  
Long Run ◽  
Interest Rate Volatility ◽  
Short Run ◽  
Using Data ◽  
Swap Spreads

Using data from the Treasury versus London Interbank Offer Swap Rates (LIBOR) for October 1987 to June 1998, this paper examines the determinants of swap spreads in the Treasury-LIBOR interest rate swap market. This study hypothesizes Treasury-LIBOR swap spreads as a function of the Treasury rate of comparable maturity, the slope of the yield curve, the volatility of short-term interest rates, a proxy for default risk, and liquidity in the swap market. The study finds that, in the long-run, swap spreads are negatively related to the yield curve slope and liquidity in the swap market. We also find that swap spreads are positively related to the short-term interest rate volatility. In the short-run, swap market's response to higher default risk seems to be higher spread between the bid and offer rates.

scholarly journals Exploring the sources of loan default clustering using survival analysis with frailty

2021 ◽  
Author(s):  
Enrique Bátiz-Zuk ◽  
Abdulkadir Mohamed ◽  
Fátima Sánchez-Cajal
Keyword(s):  
Survival Analysis ◽  
Default Risk ◽  
Banking Sector ◽  
Bank Loan ◽  
Expected Loss ◽  
Firm Level ◽  
Loan Default ◽  
Level Data ◽  
Default Rate ◽  
Systemically Important Banks

This paper investigates whether three microeconomic loan characteristics are sources of loan default clustering in the Mexican banking sector by employing survival analysis with frailty. Using a large sample of bank loan level data granted to micro, small and medium sized firms from January 2010 to 2018, we test whether classifying loans by the bank's systemic importance, industry or at individual firm level enhances the predictions of loans defaults. Our results show that loans granted by Domestic Systemically Important Banks contribute to the default clustering in micro and small firm loans. This is due to aggregate default rate levels and clusters that are large for these firms loans compared with loans provided to medium-sized firms. These findings have important implications for bank's expected loss management related to the correlated loan default risk

User Interface and Firsthand Experience in Retail Investing

2020 ◽  
Author(s):  
Li Liao ◽  
Zhengwei Wang ◽  
Jia Xiang ◽  
Hongjun Yan ◽  
Jun Yang
Keyword(s):  
Interest Rates ◽  
Time Pressure ◽  
Credit Ratings ◽  
Loan Default ◽  
Slowing Down ◽  
Physical Attributes ◽  
Per Se ◽  
The Difference ◽  
Using Data ◽  
Firsthand Experience

Abstract Using data from a major online peer-to-peer lending platform, we document that, due to time pressure, investors appear to focus on interest rates and only partially account for credit ratings in their decisions. The effect is stronger for mobile-based investors than for PC-based ones. Our evidence suggests that this variation is caused by the difference in information content on the interfaces rather than differences in the devices’ physical attributes per se. Investors improve their decisions by slowing down and paying more attention to credit ratings after experiencing a loan default firsthand, but not after observing others experiencing defaults.

Latin America P2P lending faces structural constraints

2019 ◽  
Keyword(s):  
Latin America ◽  
Interest Rates ◽  
Peer To Peer ◽  
Financial Inclusion ◽  
Growth Potential ◽  
Structural Constraints ◽  
Content Type ◽  
Access To Credit ◽  
P2p Lending ◽  
Key Barrier

Subject Peer-to-peer lending. Significance Financial technology (fintech) is starting to increase financial inclusion in Latin America. Lending is key to this. Peer-to-peer (P2P) lending has significant potential to give access to credit at relatively reasonable interest rates to those who traditionally have been ‘unbanked’. Impacts Technology-driven moves to increase financial inclusion will lead to new alternative finance providers emerging across the region. Regulation will struggle to keep pace with technology, which is likely to stem the growth potential of alternative lending. Trust issues will be a key barrier to savers depositing money with P2P lenders in Latin America.

Bilateral Implicit Taxes and Anti-Competitive Banking Regulation

2009 ◽  
Vol 31 (2) ◽  
pp. 45-73
Author(s):  
David G. Harris ◽  
Emre Kilic
Keyword(s):  
Interest Rates ◽  
Banking Regulation ◽  
Specific Data ◽  
Tax Cost ◽  
Tax Deductions ◽  
Tax Benefits ◽  
Federal Taxes ◽  
Loan Interest Rates ◽  
Using Data ◽  
Tax Costs

ABSTRACT: This paper examines how banks impound implicit taxes into loan interest rates. Economic theory predicts that the most flexible party bears the least tax cost. We hypothesize that mortgagors, being geographically fixed, are less flexible than banks and bear greater implicit tax costs, and that this effect diminishes when banks begin to compete across state lines after the 1994 Riegle-Neal Interstate and Branching Efficiency Act. Using data from 1977 to 2004 on banks’ and mortgagors’ state and federal taxes and detailed loan-specific data on mortgage originations, we investigate how interest rates vary separately with banks’ and mortgagors’ taxes. We find that mortgage rates vary positively with both banks’ tax costs and the value of mortgagors’ interest tax deductions. These findings are consistent with banks both passing on their tax costs to borrowers and capturing portions of borrowers’ tax benefits. The estimated annual magnitude of this tax shift is $23 billion, which we find declined after 1993 by approximately 40 percent.

DEBT DENOMINATION AND DEFAULT RISK IN EMERGING MARKETS

2012 ◽  
Vol 17 (5) ◽  
pp. 1070-1095 ◽  
Author(s):  
Inci Gumus
Keyword(s):  
Interest Rates ◽  
Open Economy ◽  
Default Risk ◽  
Foreign Currency ◽  
Emerging Market ◽  
Small Open Economy ◽  
Domestic Currency ◽  
Default Rate ◽  
Foreign Currency Debt ◽  
High Output

This paper develops a two-sector small open economy model to analyze the effects of the currency denomination of debt on default risk and interest rates in emerging market economies. Default risk is determined endogenously and depends on the incentives for repayment. The economy can borrow using tradable-denominated nonindexed bonds or bonds whose return is indexed to the domestic price index, which are used as proxies for foreign currency and domestic currency debt, respectively. The model predicts that foreign currency debt leads to lower default risk for high output levels and domestic currency debt reduces the default risk for low output levels. Although the effect of debt denomination on default risk changes with the output level, the default rate of the economy and average interest rates decline as domestic currency borrowing increases. In addition, domestic currency borrowing is found to reduce the countercyclicality of interest rates and the trade balance.

Is Group Lending a Collateral for Informal Credit?

2021 ◽  
pp. 146499342110633
Author(s):  
Tiziana Venittelli
Keyword(s):  
Interest Rates ◽  
Default Risk ◽  
Empirical Support ◽  
Credit Market ◽  
Theoretical Research ◽  
Group Lending ◽  
Joint Liability ◽  
Informal Credit ◽  
Using Data ◽  
The One

This article explores how participation in microfinance programs affects informal credit conditions. Using data on the rural credit market of Andhra Pradesh, I provide evidence that group lending participants obtain lower interest rates from the informal credit market. This result can be explained by two main factors. On the one hand, due to joint liability, group lending clients have high incentives to monitor each other, which implies a reduction in the agency costs for moneylenders. On the other hand, as microfinance borrowers are required to invest the credit in income generating activities, they face a lower default risk. Taken together, these two mechanisms may explain why microcredit borrowers are perceived as less risky by informal lenders. Overall, the findings suggest that moneylenders benefit from the duality in the market, thus providing empirical support to recent theoretical research hypothesizing that there is a complementarity relationship between formal and informal credit suppliers.

scholarly journals DETERMINANTS OF AGRICULTURE-RELATED LOAN DEFAULT: EVIDENCE FROM CHINA

2020 ◽  
Vol 23 ◽  
pp. 129-150
Author(s):  
Zhichao Yin ◽  
Lei Meng ◽  
Yezhou Sha
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Firm Size ◽  
Ownership Structure ◽  
Loan Default ◽  
Logit Regression ◽  
Quality Rating ◽  
Default Rate ◽  
Managerial Quality ◽  
Insight Into

This paper investigates agriculture-related loan default in 2002–2009 through a largedata set from a leading Chinese state-owned bank. Using logit regression, we findthe default rate on agriculture-related loans is significantly higher than that on non–agriculture-related loans. We find that base interest rates, loan maturity, the typeof collateral, firm size, ownership structure, and managerial quality rating have asignificant impact on agriculture-related loan default, but this also depends on howagriculture-related loans are defined. The results provide insight into the real impactof monetary policy on agriculture-related lending.

Sign in / Sign up

Export Citation Format

Share Document