Work detail

Portfolio diversification on P2P loan markets

Author: Mgr. Petr Polák, M.Sc.
Year: 2017 - winter
Leaders: PhDr. Ing. Jiří Skuhrovec PhD.
Consultants:
Work type: Finance, Financial Markets and Banking
Masters
Language: English
Pages: 77
Awards and prizes:
Link: https://is.cuni.cz/webapps/zzp/detail/185535/
Abstract: This thesis presents ways how investors can construct optimal portfolios on on-line peer-to-peer lending
platforms. Thesis uses standard portfolio theory and unique dataset from Lending Club platform of over
886 thousand loans issued since 2008 till the end of 2015. Firstly, this thesis shows that there is a nonzero
covariance between loans from different credit grades and it is necessary to include it in portfolio
management optimization. Secondly, the thesis with the help of a logistic regression identifies loan
default determinants. Using the default predictions, the portfolio performance can be improved
significantly. Thirdly, the thesis simulates diversification benefits stemming from investing into multiple
loans.
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