Author Topic: "Expected Return" - where does this number come from?  (Read 3091 times)

jennrod12

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"Expected Return" - where does this number come from?
« on: October 25, 2015, 11:58:52 PM »
I found tons of info about the BLE on the Peer Cube blog pages, but I'm not sure where the "Expected Return" number comes from?

I really enjoy the site, thanks to Anil for putting it together! 

I also like the twitter feed, I use it to see how many notes were issued and how many loans were available at that time.  For example, if very few loans were issued, it may not be worth my time to log in and try to pick up new loans.  If there is a ton of inventory and a lot of loans were issued, it might be worth my time to look, even if it's an hour or two after the drop.

Jenn

AnilG

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Re: "Expected Return" - where does this number come from?
« Reply #1 on: October 26, 2015, 01:37:12 PM »
At high level, expected return is what left after subtracting the expected losses from the yield of a loan. The expected losses is mostly consist of potential losses due to loan default (default risk), it also takes into consideration few other factors such as economic conditions.

Thanks for liking twitter feed and site. You are using it exactly the way I thought lenders who want to hand-pick loans might use the twitter alert. You suggestions to make PeerCube service more useful are always welcome.
« Last Edit: October 26, 2015, 01:39:39 PM by AnilG »
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jennrod12

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Re: "Expected Return" - where does this number come from?
« Reply #2 on: October 26, 2015, 09:11:08 PM »
Thanks for the explanation - just to be clear, does the "Risk Index" factor into the "Expected Return"?  Or is it up to the user to come up with a "risk factor adjusted expected return"?

Jenn

AnilG

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Re: "Expected Return" - where does this number come from?
« Reply #3 on: October 26, 2015, 10:17:35 PM »
Yes, Risk Index is already factored into Expected Return.

Thanks for the explanation - just to be clear, does the "Risk Index" factor into the "Expected Return"?  Or is it up to the user to come up with a "risk factor adjusted expected return"?

Jenn
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lascott

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Re: "Expected Return" - where does this number come from?
« Reply #4 on: October 26, 2015, 10:27:41 PM »
At high level, expected return is what left after subtracting the expected losses from the yield of a loan.
So at a high level, your version of this data.

Image: http://i.imgur.com/c5gGHiM.png

via: https://www.lendingclub.com/info/demand-and-credit-profile.action
Tools I use: (main) BlueVestment: https://www.bluevestment.com/app/pricing + https://www.interestradar.com/ , (others) Lending Robot referral link: https://www.lendingrobot.com/ref/scott473/  & Peercube referral code: DFVA9Y

edward

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Re: "Expected Return" - where does this number come from?
« Reply #5 on: October 27, 2015, 01:22:26 PM »
lascott,

Is it your understanding that the chart you posted includes both 36 and 60 month loans combined? And that unlike the charts following it on the Lending Club website, this one does not allow you to display the data separated into 36 and 60 months separately?

lascott

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Re: "Expected Return" - where does this number come from?
« Reply #6 on: October 27, 2015, 03:26:40 PM »
lascott,Is it your understanding that the chart you posted includes both 36 and 60 month loans combined? And that unlike the charts following it on the Lending Club website, this one does not allow you to display the data separated into 36 and 60 months separately?
The description below the graph indicates all loans so I would guess both.
Tools I use: (main) BlueVestment: https://www.bluevestment.com/app/pricing + https://www.interestradar.com/ , (others) Lending Robot referral link: https://www.lendingrobot.com/ref/scott473/  & Peercube referral code: DFVA9Y