Print

[Fred93]

I'm having a hard time figuring out what "Cumulative average annual loss" exactly means.
I think it should either be "cumulative loss" or "annual loss", but not both. And where are the HR's?

I believe they are annualizing the cumulative loss.  An important thing to note is that when they use the word "loss" they mean they are counting $ lost, meaning only part of the loan.  This is NOT the same as a default rate.  If loans defaulted evenly over the duration of the loan, then about half of the money would be lost on the average.  Thus if you count "loss" rates rather than "default" rates you can show people a number HALF AS BIG.

However, if you want to do a quick computation in your head, comparing to the interest rate, you need the DEFAULT RATE, not the "loss" rate.  The loss rate is therefore misleading.

[onthefence]

I'm having a hard time figuring out what "Cumulative average annual loss" exactly means.

That is something I am uncertain about too.

And where are the HR's?

The HR numbers are in the report.  I dropped them from the graph as I considered the AA-E credit ratings to be more interesting and the HRs really spiked the chart.

Also there was no "Prosper Rating" system before registration. At that time they used the old credit grade system.

I wonder about this too.

Prosper could retroactively sample the data based on their new qualifications.  But Prosper also recently changed their qualifications for their Prosper rating system.  So is it Prosper's New rating system or Prosper's Newer New rating system.  That is part of why I posted the graphs.

Honestly, they look pretty odd.  There is a lot of very unusual shifts early on and they all strangely flatten out at 28 months.

[ira01]

However, if you want to do a quick computation in your head, comparing to the interest rate, you need the DEFAULT RATE, not the "loss" rate.  The loss rate is therefore misleading.

Wait, you mean to say that Prosper is putting out misleading statistics -- that can't be so.   

  

[mothandrust]

What I find interesting is that Prosper's Ratings show D's performing better than C's via their historical data.

I was wondering about this too.  Only thing I can think of is that the D's had a higher coupon rate than the C's (on average) but the late/default performances were similar.

[Senator]

They're saying that all of their loan grades average out to a loss.

[zzj0770]

[SPAM]