Author Topic: blog / duration  (Read 4722 times)

Fred93

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blog / duration
« on: November 10, 2016, 07:05:34 AM »
Zach, congratulations on your latest blog.  I especially appreciate that you showed simulated recession results.  Everyone should do that.

In the blog, you said
Quote
duration on Lending Club loans have historically averaged 2.07 years (36-month loans) and 3.03 years (60-month loans)

That doesn't seem right.  Duration is the weighted average time until payment.  Loans pay equal sized payments, so the duration of a 36 mo loan without prepayment is 18.5 months, or 1.54 years.  With prepayment, duration will be shorter.  Therefore any number above 1.54 years seems like it must be wrong.

My calculation of average duration of all history of completed (Fully Paid) LC 36-month loans is 12.14 months, or 1.01 years.

Zach

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Re: blog / duration
« Reply #1 on: November 12, 2016, 05:15:07 PM »
Good catch. Intended that to be maturity and have updated the post to reflect that.