Release Time:2019-03-10  Hits:

Indexed by: Journal Article

Date of Publication: 2016-03-01

Journal: EUROPEAN JOURNAL OF OPERATIONAL RESEARCH

Included Journals: Scopus、SSCI、EI、SCIE

Volume: 249

Issue: 2

Page Number: 417-426

ISSN: 0377-2217

Key Words: Data mining; P2P lending; Credit risk assessment; Instance-based method; Investment decisions

Abstract: Recent years have witnessed increased attention on peer-to-peer (P2P) lending, which provides an alternative way of financing without the involvement of traditional financial institutions. A key challenge for personal investors in P2P lending marketplaces is the effective allocation of their money across different loans by accurately assessing the credit risk of each loan. Traditional rating-based assessment models cannot meet the needs of individual investors in P2P lending, since they do not provide an explicit mechanism for asset allocation. In this study, we propose a data-driven investment decision-making framework for this emerging market. We designed an instance-based credit risk assessment model, which has the ability of evaluating the return and risk of each individual loan. Moreover, we formulated the investment decision in P2P lending as a portfolio optimization problem with boundary constraints. To validate the proposed model, we performed extensive experiments on real-world datasets from two notable P2P lending marketplaces. Experimental results revealed that the proposed model can effectively improve investment performances compared with existing methods in P2P lending. (C) 2015 Elsevier B.V. and Association of European Operational Research Societies (EURO) within the International Federation of Operational Research Societies (IFORS). All rights reserved.