<abstract xmlns="http://www.w3.org/1999/xhtml"><p>Arguably a cornerstone of credit risk modelling is the probability of default. This article aims is to search for the evidence of relationship between loan characteristics and probability of default on peer-to-peer (P2P) market. In line with that, two loan characteristics are analysed: 1) loan term length and 2) loan purpose. The analysis is conducted using survival analysis approach within the vintage framework. Firstly, 12 months probability of default through the cycle is used to compare riskiness of analysed loan characteristics. Secondly, log-rank test is employed in order to compare complete survival period of cohorts. Findings of the paper suggest that there is clear evidence of relationship between analysed loan characteristics and probability of default. Longer term loans are more risky than the shorter term ones and the least risky loans are those used for credit card payoff.</p></abstract>

Arguably a cornerstone of credit risk modelling is the probability of default. This article aims is to search for the evidence of relationship between loan characteristics and probability of default on peer-to-peer (P2P) market. In line with that, two loan characteristics are analysed: 1) loan term length and 2) loan purpose. The analysis is conducted using survival analysis approach within the vintage framework. Firstly, 12 months probability of default through the cycle is used to compare riskiness of analysed loan characteristics. Secondly, log-rank test is employed in order to compare complete survival period of cohorts. Findings of the paper suggest that there is clear evidence of relationship between analysed loan characteristics and probability of default. Longer term loans are more risky than the shorter term ones and the least risky loans are those used for credit card payoff.

Estimating Probability of Default on Peer to Peer Market – Survival Analysis Approach

Journal of Central Banking Theory and Practice

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Arguably a cornerstone of credit risk modelling is the probability of default. This article aims is to search for the evidence of relationship between loan...

Estimating Probability of Default on Peer to Peer Market – Survival Analysis Approach

Data publikacji: 22 maj 2017

Zakres stron: 149 - 167

Otrzymano: 18 wrz 2016

Przyjęty: 21 sty 2017

DOI: https://doi.org/10.1515/jcbtp-2017-0017

Słowa kluczowe
Peer-to-peer market, Probability of default, Survival analysis, Vintage framework

© 2017 Central Bank of Montenegro

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Estimating Probability of Default on Peer to Peer Market – Survival Analysis Approach

Data publikacji: 22 maj 2017

Zakres stron: 149 - 167

Otrzymano: 18 wrz 2016

Przyjęty: 21 sty 2017

DOI: https://doi.org/10.1515/jcbtp-2017-0017

Słowa kluczowePeer-to-peer market, Probability of default, Survival analysis, Vintage framework

© 2017 Central Bank of Montenegro

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Słowa kluczowe
Peer-to-peer market, Probability of default, Survival analysis, Vintage framework