Research on Risk Pricing of Internet Finance Online Loan based on RAROC Model-an Empirical Analysis from Chinese Renren Loan Platform

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Jie Zhang. (2020). Research on Risk Pricing of Internet Finance Online Loan based on RAROC Model-an Empirical Analysis from Chinese Renren Loan Platform. Journal of Business Management and Economics, 8(10), 19–30. https://doi.org/10.15520/jbme.v8i10.3126
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Abstract

As a new mode of financing, Internet Financial online lending, which combines Internet with traditional lending, not only broadens the channels of circulation of funds, but also promotes the optimal allocation of social resources. However, the issue of the high loan risk of borrowers restricts the development of Internet financial online lending industry. Therefore, how to maximize the profits of investors under the circumstance of effectively controlling the risk of Internet financial online lending will be the key to the sustainable development of Internet lending platform. Based on this, this paper uses Logistic regression model to quantify the risk of online credit, obtains the default probability and credit rating of borrowers, constructs RAROC model according to the regulatory indicators of Basel ? Accord, and takes Renren loan, a typical domestic P2P online credit platform, as the research object, to make an empirical study on risk pricing of Internet financial online loan. The empirical results show that RAROC model is applicable to the pricing of Internet financial online loan risk, and is more flexible and risk-sensitive than the current fixed-rate pricing model of Internet lending platform, which can effectively improve the quality of Internet loan pricing.

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