• A
  • A
  • A
  • ABC
  • ABC
  • ABC
  • А
  • А
  • А
  • А
  • А
Regular version of the site

Credit risk modeling in Peer-to-Peer lending

ФИО студента: Aleksandr Mal`czev

Руководитель: Agata Maximovna Lozinskaia

Кампус/факультет: Faculty of Economics

Программа: Bachelor

Оценка: 10

Год защиты: 2014

<p>Consumer lending in the United States currently accounts for more than $ 3 trillion. At the same a new branch of consumer lending &ndash; &laquo;peer-to-peer&raquo; (P2P) lending is developing rapidly, for example, the volume of loans given of largest American P2P lending company Lending Club accounts for more than $ 4 billion. However, there are quite a few studies considering credit risk evaluation in P2P lending, special features of credit risk evaluation remains unexplored in this area. The term P2P lending describes the loan origination process between private individuals on online platforms, without using services of traditional&nbsp;financial intermediaries&nbsp;such as a commercial banks. This paper proposes a method for modeling credit risk in P2P lending. The result of the modeling will be a list of factors influencing credit risk in this type of lending. Credit risk evaluation is carried out by assessing the probability of borrower&rsquo;s default based on data provided by American P2P lending company Lending Club during 2008-2011 time period. Modeling method implies constructing a binary choice model, particularly probit model and probit model with instrumental variables. Probit model with instrumental variables is constructed in order to adjust the model for endogeneity of some factors, revolving line utilization rate in particular. Instrumental variables are the initial rate, averaged over groups of credit risk and the borrowers&rsquo; debt-to-income ratio. The main factors influencing the credit risk of the borrower are credit risk indicators used in the USA and by Lending Club in particular , the interest rate of the loan, the borrower&#39;s income, discount rate set by the Central Bank of the United States at the moment of filing for a loan, the borrower&#39;s credit history, and previously mentioned revolving line utilization rate. Results are applied to building investor portfolios based on group of criteria derived from the credit risk modeling. Also the experience of modeling endogeneity in the process of credit risk evaluation may be useful to commercial banks during the development of risk-management systems for consumer lending.</p>

Full text (added May 23, 2014) (612.40 Kb)

Student Theses at HSE must be completed in accordance with the University Rules and regulations specified by each educational programme.

Summaries of all theses must be published and made freely available on the HSE website.

The full text of a thesis can be published in open access on the HSE website only if the authoring student (copyright holder) agrees, or, if the thesis was written by a team of students, if all the co-authors (copyright holders) agree. After a thesis is published on the HSE website, it obtains the status of an online publication.

Student theses are objects of copyright and their use is subject to limitations in accordance with the Russian Federation’s law on intellectual property.

In the event that a thesis is quoted or otherwise used, reference to the author’s name and the source of quotation is required.

Search all student theses