IDEAS home Printed from https://ideas.repec.org/p/arx/papers/1802.10000.html
   My bibliography  Save this paper

Private Information, Credit Risk and Graph Structure in P2P Lending Networks

Author

Listed:
  • J. Christopher Westland
  • Tuan Q. Phan
  • Tianhui Tan

Abstract

This research investigated the potential for improving Peer-to-Peer (P2P) credit scoring by using "private information" about communications and travels of borrowers. We found that P2P borrowers' ego networks exhibit scale-free behavior driven by underlying preferential attachment mechanisms that connect borrowers in a fashion that can be used to predict loan profitability. The projection of these private networks onto networks of mobile phone communication and geographical locations from mobile phone GPS potentially give loan providers access to private information through graph and location metrics which we used to predict loan profitability. Graph topology was found to be an important predictor of loan profitability, explaining over 5.5% of variability. Networks of borrower location information explain an additional 19% of the profitability. Machine learning algorithms were applied to the data set previously analyzed to develop the predictive model and resulted in a 4% reduction in mean squared error.

Suggested Citation

  • J. Christopher Westland & Tuan Q. Phan & Tianhui Tan, 2018. "Private Information, Credit Risk and Graph Structure in P2P Lending Networks," Papers 1802.10000, arXiv.org.
    • Handle: RePEc:arx:papers:1802.10000
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/1802.10000
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. repec:cup:cbooks:9780511771576 is not listed on IDEAS
    2. Steven H. Strogatz, 2001. "Exploring complex networks," Nature, Nature, vol. 410(6825), pages 268-276, March.
    3. Easley,David & Kleinberg,Jon, 2010. "Networks, Crowds, and Markets," Cambridge Books, Cambridge University Press, number 9780521195331, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Luisa Roa & Andr'es Rodr'iguez-Rey & Alejandro Correa-Bahnsen & Carlos Valencia, 2021. "Supporting Financial Inclusion with Graph Machine Learning and Super-App Alternative Data," Papers 2102.09974, arXiv.org.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jian Mou & J. Christopher Westland & Tuan Q. Phan & Tianhui Tan, 2020. "Microlending on mobile social credit platforms: an exploratory study using Philippine loan contracts," Electronic Commerce Research, Springer, vol. 20(1), pages 173-196, March.
    2. Martijn Warnier & Vincent Alkema & Tina Comes & Bartel Walle, 2020. "Humanitarian access, interrupted: dynamic near real-time network analytics and mapping for reaching communities in disaster-affected countries," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 42(3), pages 815-834, September.
    3. Salehi, Mostafa & Rabiee, Hamid R. & Jalili, Mahdi, 2010. "Motif structure and cooperation in real-world complex networks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(23), pages 5521-5529.
    4. Blazquez-Soriano, Amparo & Ramos-Sandoval, Rosmery, 2022. "Information transfer as a tool to improve the resilience of farmers against the effects of climate change: The case of the Peruvian National Agrarian Innovation System," Agricultural Systems, Elsevier, vol. 200(C).
    5. Martin L. Weitzman, 2015. "A Voting Architecture for the Governance of Free-Driver Externalities, with Application to Geoengineering," Scandinavian Journal of Economics, Wiley Blackwell, vol. 117(4), pages 1049-1068, October.
    6. Emerson, Isaac Arnold & Amala, Arumugam, 2017. "Protein contact maps: A binary depiction of protein 3D structures," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 465(C), pages 782-791.
    7. Faedo, Nicolás & García-Violini, Demián & Ringwood, John V., 2021. "Controlling synchronization in a complex network of nonlinear oscillators via feedback linearisation and H∞-control," Chaos, Solitons & Fractals, Elsevier, vol. 144(C).
    8. Wei Zhong, 2017. "Simulating influenza pandemic dynamics with public risk communication and individual responsive behavior," Computational and Mathematical Organization Theory, Springer, vol. 23(4), pages 475-495, December.
    9. Xiao‐Bing Hu & Hang Li & XiaoMei Guo & Pieter H. A. J. M. van Gelder & Peijun Shi, 2019. "Spatial Vulnerability of Network Systems under Spatially Local Hazards," Risk Analysis, John Wiley & Sons, vol. 39(1), pages 162-179, January.
    10. Guo Weilong & Minca Andreea & Wang Li, 2016. "The topology of overlapping portfolio networks," Statistics & Risk Modeling, De Gruyter, vol. 33(3-4), pages 139-155, December.
    11. Ruiz Vargas, E. & Mitchell, D.G.V. & Greening, S.G. & Wahl, L.M., 2014. "Topology of whole-brain functional MRI networks: Improving the truncated scale-free model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 405(C), pages 151-158.
    12. Igor Belykh & Mateusz Bocian & Alan R. Champneys & Kevin Daley & Russell Jeter & John H. G. Macdonald & Allan McRobie, 2021. "Emergence of the London Millennium Bridge instability without synchronisation," Nature Communications, Nature, vol. 12(1), pages 1-14, December.
    13. Thomas J. Sargent & John Stachurski, 2022. "Economic Networks: Theory and Computation," Papers 2203.11972, arXiv.org, revised Jul 2022.
    14. Berahmand, Kamal & Bouyer, Asgarali & Samadi, Negin, 2018. "A new centrality measure based on the negative and positive effects of clustering coefficient for identifying influential spreaders in complex networks," Chaos, Solitons & Fractals, Elsevier, vol. 110(C), pages 41-54.
    15. Zhang, Yun & Liu, Yongguo & Li, Jieting & Zhu, Jiajing & Yang, Changhong & Yang, Wen & Wen, Chuanbiao, 2020. "WOCDA: A whale optimization based community detection algorithm," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 539(C).
    16. Soh, Harold & Lim, Sonja & Zhang, Tianyou & Fu, Xiuju & Lee, Gary Kee Khoon & Hung, Terence Gih Guang & Di, Pan & Prakasam, Silvester & Wong, Limsoon, 2010. "Weighted complex network analysis of travel routes on the Singapore public transportation system," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(24), pages 5852-5863.
    17. Wang, Qingyun & Duan, Zhisheng & Chen, Guanrong & Feng, Zhaosheng, 2008. "Synchronization in a class of weighted complex networks with coupling delays," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(22), pages 5616-5622.
    18. Bernd (B.) Heidergott & Jia-Ping Huang & Ines (I.) Lindner, 2018. "Naive Learning in Social Networks with Random Communication," Tinbergen Institute Discussion Papers 18-018/II, Tinbergen Institute.
    19. Johannes M. Bauer & Michael Latzer, 2016. "The economics of the Internet: an overview," Chapters, in: Johannes M. Bauer & Michael Latzer (ed.), Handbook on the Economics of the Internet, chapter 1, pages 3-20, Edward Elgar Publishing.
    20. Kobayashi, Teruyoshi & Takaguchi, Taro, 2018. "Identifying relationship lending in the interbank market: A network approach," Journal of Banking & Finance, Elsevier, vol. 97(C), pages 20-36.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:1802.10000. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.