Tuesday, June 13, 2006

prosper update $1,006.51 invested average interest rate 13.91%

Here's a quick prosper update.
So far my borrowers are paying their loans, which is nice. I just won an excellent auction closing a AA credit borrower at 15%, for which I'm very pleased.
Here's my overall summary:

Here's a statement of my loand performance as of yesterday, my average interest rate was 13.84%.

The loan auction I just won at 15% helped push up my average loan rate to 13.91%. Here it is:

Ultimately, most of my holdings are A and AA, with a few B and very few C grade borrowers. 13%+ rates are pretty difficult to maintain for such a heavily A weighted group, once my overall investment volume into prosper.com picks up, I may not be able to maintain such high rates.

I'd like to find or build a tool that would let me model risk return ratios for different lending mixes. Specifically 13.91% is not my risk adjusted return ration, it should be lower, maybe 11.91% or 12.91%. The math is much more complex than simply subtracting the average default rate.

Somehow I'm thinking I would be happiest with a 16% risk adjusted rate of return, however, I'm not certain what level of risk I'd need to assume.

Also, I should mention that I've lost a few auctions, which has been frustrating. But losing did have the beneficial effect of forcing me to evaluate new and alternative auctions that had just entered the market.



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