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Network centrality and credit risk: A comprehensive analysis of peer-to-peer lending dynamics

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Listed:
  • Liu, Yiting
  • Baals, Lennart John
  • Osterrieder, Jörg
  • Hadji-Misheva, Branka

Abstract

This letter analyzes credit risk assessment in the Peer-to-Peer (P2P) lending domain by leveraging a comprehensive dataset from Bondora, a leading European P2P platform. Through combining traditional credit features with network topological features, namely the degree centrality, we showcase the crucial role of a borrower’s position and connectivity within the P2P network in determining loan default probabilities. Our findings are bolstered by robustness checks using shuffled centrality features, which further underscore the significance of integrating both financial and network attributes in credit risk evaluation. Our results shed new light on credit risk determinants in P2P lending and benefit investors in capturing inherent information from P2P loan networks.

Suggested Citation

  • Liu, Yiting & Baals, Lennart John & Osterrieder, Jörg & Hadji-Misheva, Branka, 2024. "Network centrality and credit risk: A comprehensive analysis of peer-to-peer lending dynamics," Finance Research Letters, Elsevier, vol. 63(C).
    • Handle: RePEc:eee:finlet:v:63:y:2024:i:c:s1544612324003386
    DOI: 10.1016/j.frl.2024.105308
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    References listed on IDEAS

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    2. Gao, Hongming & Zhu, Hui & Ma, Haiying, 2024. "Peer effect and funding success: Analyzing friendship networks in online credit markets," Finance Research Letters, Elsevier, vol. 66(C).
    3. Sahiba Khan & Ranjit Singh & Jayashree Bhattacharjee, 2025. "Factors affecting the probability of funding success and default risk of borrowers in P2P lending: a social network analysis approach," Journal of Marketing Analytics, Palgrave Macmillan, vol. 13(3), pages 645-667, September.

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