FinTech Lending When Things Look Gloomy, Friend or Foe? Open Access

Wu, Fiona Jiaqi (Summer 2021)

Permanent URL: https://etd.library.emory.edu/concern/etds/t435gf405?locale=en
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Abstract

Applying a random forest classification model to construct Prosper’s rating distribution as if in a normal economic condition, I demonstrate that the FinTech peer to peer lending platforms such as Prosper modified the risk signals it sent to investors facing an unexpected, sudden, exogenous economic shock caused by the Covid-19. I show that investors are more risk averse during a recession; adjusting investors’ perceptions on borrowers risk levels by making some borrowers look safer would increase loans’ probabilities to be funded. FinTech lending firms facilitate liquidities in the credit market, a precious diamond during an economic downturn, while investors are likely being under-compensated with the amount of risks undertaken.

Table of Contents

Introduction

 

Section 1

1.1         P2 Market Overview

1.2         Prosper Background

1.3         Data Description

1.4         Methodology

1.5         Feature Selections

 

Section 2 - Summary of Findings

2.1     Prediction Accuracy

2.2     Prosper Rating Distribution

2.3     Investor Attention to Risk Signal

2.4         Investor Risk Aversion

 

Section 3

3.0      Motivations

 

Conclusions

 

References

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