A joint scoring model for peer-to-peer and traditional lending: A bivariate model with copula dependence

Raffaella Calabrese, Silvia Angela Osmetti, Luca Zanin

Research output: Contribution to journalArticlepeer-review

Abstract / Description of output

We analyse the dependence between defaults in peer-to-peer (P2P) lending and credit bureaus.To achieve this aim, we propose a new flexible bivariate regression model suitable for binary imbalanced samples. We use different copula functions to model the dependence structure between defaults in the two credit markets. We implement the model in the R package BivGEV and we explore the empirical properties of the proposed fitting procedure by a Monte Carlo study. The application of this proposal to a comprehensive dataset provided by Lending Club shows a significant level of dependence between the defaults in P2P and credit bureaus. Finally, we find that our model outperforms the bivariate probit and univariate log it in predicting P2P default, in estimating the Value at Risk and the expected Shortfall.
Original languageEnglish
Pages (from-to)1163-1188
Number of pages26
JournalJournal of the Royal Statistical Society: Statistics in Society Series A
Volume182
Issue number4
Early online date7 Oct 2019
DOIs
Publication statusE-pub ahead of print - 7 Oct 2019

Keywords / Materials (for Non-textual outputs)

  • binary imbalanced samples
  • copula-based model
  • credit bureau
  • generalized extreme value regression model
  • peer-to-peer lending

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