Next Article in Journal
National Culture and Corporate Rating Migrations
Previous Article in Journal
The Fundamental Equity Premium and Ambiguity Aversion in an International Context
Previous Article in Special Issue
A Threshold Type Policy for Trading a Mean-Reverting Asset with Fixed Transaction Costs
Article Menu
Issue 4 (December) cover image

Export Article

Open AccessArticle
Risks 2018, 6(4), 129; https://doi.org/10.3390/risks6040129

Peer-To-Peer Lending: Classification in the Loan Application Process

1
School of Mathematical Sciences, Dalian University of Technology, Dalian 116024, China
2
Risk Management and Financial Engineering Lab, Department of Industrial and Systems Engineering, University of Florida, 303 Weil Hall, Gainesville, FL 32611, USA
3
Department of Industrial and Systems Engineering, Chuo University, 1-13-27 Kasuga, Bunkyo-ku, Tokyo 112-8551, Japan
*
Authors to whom correspondence should be addressed.
Received: 20 October 2018 / Revised: 2 November 2018 / Accepted: 5 November 2018 / Published: 9 November 2018
Full-Text   |   PDF [495 KB, uploaded 16 November 2018]   |  
  |   Review Reports

Abstract

This paper studies the peer-to-peer lending and loan application processing of LendingClub. We tried to reproduce the existing loan application processing algorithm and find features used in this process. Loan application processing is considered a binary classification problem. We used the area under the ROC curve (AUC) for evaluation of algorithms. Features were transformed with splines for improving the performance of algorithms. We considered three classification algorithms: logistic regression, buffered AUC (bAUC) maximization, and AUC maximization.With only three features, Debt-to-Income Ratio, Employment Length, and Risk Score, we obtained an AUC close to 1. We have done both in-sample and out-of-sample evaluations. The codes for cross-validation and solving problems in a Portfolio Safeguard (PSG) format are in the Appendix. The calculation results with the data and codes are posted on the website and are available for downloading. View Full-Text
Keywords: peer-to-peer lending; loan application process; AUC maximization; bAUC maximization; spline approximation peer-to-peer lending; loan application process; AUC maximization; bAUC maximization; spline approximation
Figures

Figure 1

This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).
SciFeed

Share & Cite This Article

MDPI and ACS Style

Wei, X.; Gotoh, J.-Y.; Uryasev, S. Peer-To-Peer Lending: Classification in the Loan Application Process. Risks 2018, 6, 129.

Show more citation formats Show less citations formats

Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.

Related Articles

Article Metrics

Article Access Statistics

1

Comments

[Return to top]
Risks EISSN 2227-9091 Published by MDPI AG, Basel, Switzerland RSS E-Mail Table of Contents Alert
Back to Top