Two regressions were used to analyse the composition of the interest rate on the primary market and the discount rate on the unregulated secondary market of the Estonian peer-to-peer lending platform Bondora. Furthermore, it was investigated how different dummy variables affect the pricing behaviour on the primary market, and if Bondora fulfills the classic peer-to-peer promises.
What drives pricing behavior in peer-to-peer loan primary and secondary markets? To answer this question, datasets from the P2P platform Bondora are examined. For the pricing behavior on the primary market, the effects of different variables on the interest rate set by the platform on Bondora are tested. The pricing behavior on the secondary market, on the other hand, is investigated regarding the discount rate. It can be used to examine which factors of a loan lead to its shares being sold at a premium or discount to the fundamental value. The regressions revealed that the expected loss has the strongest influence on the interest rate in the primary market. The effect of the expected loss on the interest rate was positive. However, gender also plays an important role in determining the price of a loan, it was found that women pay a significantly smaller interest rate than men. In general, a large part of the variance of the interest rate can be determined with the presented models. In contrast, pricing behavior in the secondary market is not as easy to predict, probably due to irrationality and cognitive limitations. Although all variables in the secondary market regression were significant, the adjusted R2 was very small at 1%. The days since the borrower defaulted had the largest impact on the price in terms of amount. Curiously, more days in default even meant that the loan share was more likely to be sold at a premium.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- Motivation
- Literature Review
- Bondora Overview
- Lending on Bondora
- Does Bondora fulfil the classic P2P promises?
- Main Findings
- The Datasets
- Dummy Regressions
- Primary Market Regression
- Secondary Market Regression
- Closing Section
- Conclusion
- Limitation
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This bachelor thesis investigates the pricing behavior in peer-to-peer (P2P) loan markets, focusing on the primary and secondary markets of the Bondora platform. The study aims to analyze the factors influencing interest rates set by the platform on Bondora’s primary market and to examine the discount rate applied to loan shares traded on its secondary market. The study seeks to identify key determinants of loan pricing in both markets and to assess the predictability of this behavior.
- Pricing behavior in P2P loan markets
- Factors influencing interest rates on the primary market
- Discount rates applied to loan shares on the secondary market
- Predictability of pricing behavior in both markets
- Impact of risk and borrower characteristics on loan pricing
Zusammenfassung der Kapitel (Chapter Summaries)
- Introduction: This chapter introduces the concept of P2P lending, its growth, and challenges faced by platforms. It provides a detailed overview of Bondora as a platform, outlining its lending process and its adherence to traditional P2P promises.
- Main Findings: This chapter delves into the data used in the analysis and presents the results of dummy regressions. It then focuses on the primary market regression, examining the influence of variables on the interest rate set by Bondora.
Schlüsselwörter (Keywords)
The thesis focuses on the primary and secondary markets of peer-to-peer (P2P) lending, specifically on the platform Bondora. Key areas of investigation include pricing behavior, interest rates, discount rates, loan characteristics, borrower risk, and data analysis. The study utilizes regression analysis to assess the impact of various factors on loan pricing in both markets.
- Quote paper
- Tillmann Klapper (Author), 2022, What Drives Pricing Behavior in Peer-to-Peer Loan Primary and Secondary Markets?, Munich, GRIN Verlag, https://www.grin.com/document/1458846
