Title: folio ytm
Post by: wlbsr on February 03, 2016, 11:00:00 PM
Post by: wlbsr on February 03, 2016, 11:00:00 PM
looking at IRR as a comparison to folio ytm. I am using the following as the stream of cash flows for the IRR...
[-ask+accrued int] as the first amount and then each of the remaining payments less the 1% fee.
i am getting a fairly consistent .3 to.55 higher than the folio calculated ytm which i am thinking may have something to do with the fact that I am taking into account accrued interest in the first amount.... not sure if folio is?
my question is that every now and then i will come across a note where my calculated IRR is 1.5 to 2.0 hight than the folio ytm. when i look at these notes, i cant find anything out of the ordinary from the others that mostly seem in line with my calculations. any ideas? here is an example.
my IRR uses [-66+.37] as the first cash flow and then 23 payments of [3.16-.03] as the remaining
LoanId Par AskPrice AccInt Class Mat N Rate Bench IRR YTM Spread Date Pmt
581 38528044 100 66.00 0.37 6 36 23 8.67 8.39 9.42 7.72 1.03 2016-01-27 3.16
https://www.lendingclub.com/foliofn/loanPerf.action?loan_id=38528044&order_id=52420245¬e_id=67624504
what am i missing since my IRR is 9.42 while folio ytm is 7.72?
[-ask+accrued int] as the first amount and then each of the remaining payments less the 1% fee.
i am getting a fairly consistent .3 to.55 higher than the folio calculated ytm which i am thinking may have something to do with the fact that I am taking into account accrued interest in the first amount.... not sure if folio is?
my question is that every now and then i will come across a note where my calculated IRR is 1.5 to 2.0 hight than the folio ytm. when i look at these notes, i cant find anything out of the ordinary from the others that mostly seem in line with my calculations. any ideas? here is an example.
my IRR uses [-66+.37] as the first cash flow and then 23 payments of [3.16-.03] as the remaining
LoanId Par AskPrice AccInt Class Mat N Rate Bench IRR YTM Spread Date Pmt
581 38528044 100 66.00 0.37 6 36 23 8.67 8.39 9.42 7.72 1.03 2016-01-27 3.16
https://www.lendingclub.com/foliofn/loanPerf.action?loan_id=38528044&order_id=52420245¬e_id=67624504
what am i missing since my IRR is 9.42 while folio ytm is 7.72?
Title: folio ytm
Post by: Fred93 on February 03, 2016, 11:00:00 PM
Post by: Fred93 on February 03, 2016, 11:00:00 PM
Title: folio ytm
Post by: TravelingPennies on February 03, 2016, 11:00:00 PM
Post by: TravelingPennies on February 03, 2016, 11:00:00 PM
Thanks - I think I inadvertently opened up two questions / issues.
1- as far as accrued interest, my logic was that since the payment is not prorated between buyer and seller for a purchase in the middle of a payment cycle and since the buyer gets the whole payment then the portion of the interest that accrued before the purchase seems like it would be an additional cash flow to the buyer. I was thinking in bonds prices are quoted without respect to accrued interest since its a moving target as interest accrues daily and the accrued interest was automatically added to the trade price at settlement. In bonds it called clean and dirty prices although i am not sure which is which. is LC/folio adding accrued interest at settlement to compensate seller or does seller need to include in their price? If accrues interest is not automatically compensated at settlement then it would seem that the accrued interest benefits the buyer and would be reflected in the ytm.
2 - the accrued interest is only responsible for 40 or 50 bps in my IRR calculation so my original question / observation above was that in the note above the LC ytm and my IRR calculation are off much more than the variance cause by accrued interest. I only see this on say 3 or 4 per 1000 notes but curious if anyone can see any reason for this on the above note. thx. Bill
1- as far as accrued interest, my logic was that since the payment is not prorated between buyer and seller for a purchase in the middle of a payment cycle and since the buyer gets the whole payment then the portion of the interest that accrued before the purchase seems like it would be an additional cash flow to the buyer. I was thinking in bonds prices are quoted without respect to accrued interest since its a moving target as interest accrues daily and the accrued interest was automatically added to the trade price at settlement. In bonds it called clean and dirty prices although i am not sure which is which. is LC/folio adding accrued interest at settlement to compensate seller or does seller need to include in their price? If accrues interest is not automatically compensated at settlement then it would seem that the accrued interest benefits the buyer and would be reflected in the ytm.
2 - the accrued interest is only responsible for 40 or 50 bps in my IRR calculation so my original question / observation above was that in the note above the LC ytm and my IRR calculation are off much more than the variance cause by accrued interest. I only see this on say 3 or 4 per 1000 notes but curious if anyone can see any reason for this on the above note. thx. Bill
Title: folio ytm
Post by: TravelingPennies on February 03, 2016, 11:00:00 PM
Post by: TravelingPennies on February 03, 2016, 11:00:00 PM
FRED: should have thought about it for 5 more minutes before replying. On second though I understand that cash flows are negative for purchase prices and then each of the remaining payments which are positive. accrued interest has nothing to do with a cash flow although it is being implicitly included in my return assuming LC is not adjusting back to the buyer at settlement.
Is LC adjusting at settlement? or is that on the sellers dime.
question 2 still stands.
Is LC adjusting at settlement? or is that on the sellers dime.
question 2 still stands.
Title: folio ytm
Post by: RaymondG on February 03, 2016, 11:00:00 PM
Post by: RaymondG on February 03, 2016, 11:00:00 PM
I get 8.4% YTM. Please see the snapshots. Beginning investment is AskPrice; Starting date is 2/3/2016 when YTM was calculated (I assume YTM on folio is calculated on fly). The principla balance $65.98 on 1/12/16 is used as starting principal to calculated Interest and Principal portion of the future payments. Note, the last payment is smaller than $3.16.
Title: folio ytm
Post by: TravelingPennies on February 04, 2016, 11:00:00 PM
Post by: TravelingPennies on February 04, 2016, 11:00:00 PM
thanks RaymondG - my code is assuming equal cash flow intervals which asnwers why some were in line with LC and others were not depending on the current date vs. the loan payment cycle dates. to what would you attribute the difference in XIRR at 8.4 and LC ytm at 7.72?
Title: folio ytm
Post by: TravelingPennies on February 04, 2016, 11:00:00 PM
Post by: TravelingPennies on February 04, 2016, 11:00:00 PM
Title: folio ytm
Post by: TravelingPennies on February 04, 2016, 11:00:00 PM
Post by: TravelingPennies on February 04, 2016, 11:00:00 PM
Title: folio ytm
Post by: Fred on February 07, 2016, 11:00:00 PM
Post by: Fred on February 07, 2016, 11:00:00 PM
Anyone figured this out yet? Or, got explanations from Folio?
Title: folio ytm
Post by: dompazz on February 08, 2016, 11:00:00 PM
Post by: dompazz on February 08, 2016, 11:00:00 PM
Title: folio ytm
Post by: TravelingPennies on February 08, 2016, 11:00:00 PM
Post by: TravelingPennies on February 08, 2016, 11:00:00 PM
partial answer opens up new questions
OK... a little more info. I find that some of the notes where my calculated IRR is higher than folio ytm is due to the payment being made is different from the original amortization. see this note or underlying loan:
https://www.lendingclub.com/foliofn/browseNotesLoanPerf.action?showfoliofn=true&loan_id=28272258&order_id=38251968¬e_id=58074749
the original amortized payment was 7.06 which is what I use to calculate my IRR (Yield). in Sept of 2015 the borrower started paying 10.14 per month which is the figure (along with a shorter number of payments) that folio uses to calculate its ytm.
I am not sure how or why the terms of the loan were changed in Sep. of 2015. My gut tells me to avoid loans where the payment amount has increased. In this case never late = True, there was one IGP payment which was after the payment amount was increased, and the fico score seems to have been constant to a slight increase during the life of the loan. I talked to LC and did not get an answer although they did promise to get back to me.
OK... a little more info. I find that some of the notes where my calculated IRR is higher than folio ytm is due to the payment being made is different from the original amortization. see this note or underlying loan:
https://www.lendingclub.com/foliofn/browseNotesLoanPerf.action?showfoliofn=true&loan_id=28272258&order_id=38251968¬e_id=58074749
the original amortized payment was 7.06 which is what I use to calculate my IRR (Yield). in Sept of 2015 the borrower started paying 10.14 per month which is the figure (along with a shorter number of payments) that folio uses to calculate its ytm.
I am not sure how or why the terms of the loan were changed in Sep. of 2015. My gut tells me to avoid loans where the payment amount has increased. In this case never late = True, there was one IGP payment which was after the payment amount was increased, and the fico score seems to have been constant to a slight increase during the life of the loan. I talked to LC and did not get an answer although they did promise to get back to me.
Title: folio ytm
Post by: TravelingPennies on February 08, 2016, 11:00:00 PM
Post by: TravelingPennies on February 08, 2016, 11:00:00 PM
LC also told me that folio controlled the information available on the note trading platform, gave me their number, and said that they could possibly give me some insight into what info was displayed and not displayed on their platform. When I called folio they said that LC used a shell of their platform of which they had very little knowledge or control and referred me back to LC for specifics.
I had also planned to ask folio if they had any idea why my api requests had been pulling the exact same number of notes since Jan 27 but didn't get that far.
I had also planned to ask folio if they had any idea why my api requests had been pulling the exact same number of notes since Jan 27 but didn't get that far.
Title: folio ytm
Post by: TravelingPennies on February 08, 2016, 11:00:00 PM
Post by: TravelingPennies on February 08, 2016, 11:00:00 PM
Title: folio ytm
Post by: Rob L on February 27, 2016, 11:00:00 PM
Post by: Rob L on February 27, 2016, 11:00:00 PM
I'm very late to this party so my questions are of the noob category.
Accrued interest all goes to the buyer so it is up to the seller to incorporate that into their ask price.
When computing ytm there is no reason given the ask price, number of remaining payments, and existing payment amount to consider accrued interest at all. Correct?
Remember noob. You have to crawl before you walk ...
Accrued interest all goes to the buyer so it is up to the seller to incorporate that into their ask price.
When computing ytm there is no reason given the ask price, number of remaining payments, and existing payment amount to consider accrued interest at all. Correct?
Remember noob. You have to crawl before you walk ...
Title: folio ytm
Post by: TravelingPennies on February 27, 2016, 11:00:00 PM
Post by: TravelingPennies on February 27, 2016, 11:00:00 PM
Title: folio ytm
Post by: Rob L on February 28, 2016, 11:00:00 PM
Post by: Rob L on February 28, 2016, 11:00:00 PM
I have a unique and yes even perhaps bizarre way of computing ytm simply as an educational exercise (not a useful tool).
It only uses an on-line loan amortization schedule calculator such as:
http://www.bankrate.com/calculators/mortgages/amortization-calculator.aspx
There is no "closed form" equation that will yield ytm given the set of parameters. Otherwise why bother.
So, again for educational purposes, enter the Folio asking amount (in pennies) as the loan amount (pennies needed for precision like 2500 for $25).
Enter the remaining number of months as the term.
Make a guess at the interest rate xx.xx% (when you finish this will be ytm).
Hit compute and the monthly payment will be computed and displayed.
Refine your interest rate guess so that eventually the monthly payment computed equals the existing monthly payment for the original loan.
Finally when you guess the interest rate that makes the new payment the same as the original then that interest rate is ytm.
Again, for the education of a complete noob, I ran this procedure for two loans.
One was pretty much dead on the same as the Folio provided and the other significantly higher.
Given the educational nature of the exercise is my procedure correct (meaning one of the Folio displayed ytm's is off badly) or is this my approach conceptually a bag of rubbish? Naturally I'd be curious as to what is wrong with the procedure of course.
TIA.
It only uses an on-line loan amortization schedule calculator such as:
http://www.bankrate.com/calculators/mortgages/amortization-calculator.aspx
There is no "closed form" equation that will yield ytm given the set of parameters. Otherwise why bother.
So, again for educational purposes, enter the Folio asking amount (in pennies) as the loan amount (pennies needed for precision like 2500 for $25).
Enter the remaining number of months as the term.
Make a guess at the interest rate xx.xx% (when you finish this will be ytm).
Hit compute and the monthly payment will be computed and displayed.
Refine your interest rate guess so that eventually the monthly payment computed equals the existing monthly payment for the original loan.
Finally when you guess the interest rate that makes the new payment the same as the original then that interest rate is ytm.
Again, for the education of a complete noob, I ran this procedure for two loans.
One was pretty much dead on the same as the Folio provided and the other significantly higher.
Given the educational nature of the exercise is my procedure correct (meaning one of the Folio displayed ytm's is off badly) or is this my approach conceptually a bag of rubbish? Naturally I'd be curious as to what is wrong with the procedure of course.
TIA.
Title: folio ytm
Post by: Fred on February 29, 2016, 11:00:00 PM
Post by: Fred on February 29, 2016, 11:00:00 PM
Title: folio ytm
Post by: TravelingPennies on February 29, 2016, 11:00:00 PM
Post by: TravelingPennies on February 29, 2016, 11:00:00 PM
Title: folio ytm
Post by: TravelingPennies on March 01, 2016, 11:00:00 PM
Post by: TravelingPennies on March 01, 2016, 11:00:00 PM
Title: folio ytm
Post by: RaymondG on March 01, 2016, 11:00:00 PM
Post by: RaymondG on March 01, 2016, 11:00:00 PM
Title: folio ytm
Post by: Fred93 on March 01, 2016, 11:00:00 PM
Post by: Fred93 on March 01, 2016, 11:00:00 PM
Title: folio ytm
Post by: TravelingPennies on March 02, 2016, 11:00:00 PM
Post by: TravelingPennies on March 02, 2016, 11:00:00 PM
Title: folio ytm
Post by: TravelingPennies on March 02, 2016, 11:00:00 PM
Post by: TravelingPennies on March 02, 2016, 11:00:00 PM
Title: folio ytm
Post by: wlbsr on March 02, 2016, 11:00:00 PM
Post by: wlbsr on March 02, 2016, 11:00:00 PM
wow. how did you catch that?
i started buying notes on folio in January, have purchased 42 so far and 2 of the 42 have been fully repaid. don't think this was one of them though.
i started buying notes on folio in January, have purchased 42 so far and 2 of the 42 have been fully repaid. don't think this was one of them though.
Title: folio ytm
Post by: TravelingPennies on March 02, 2016, 11:00:00 PM
Post by: TravelingPennies on March 02, 2016, 11:00:00 PM
Title: folio ytm
Post by: TravelingPennies on March 02, 2016, 11:00:00 PM
Post by: TravelingPennies on March 02, 2016, 11:00:00 PM
I have had 2 payoffs out of 42 loans in my first 2 months. whats the downside of an early payoff?
I wonder if this particular note being paid off was a coincidence. My original flag was based on an irregular ytm because of persistent payments at a level above the original amortized amount.
I wonder if this particular note being paid off was a coincidence. My original flag was based on an irregular ytm because of persistent payments at a level above the original amortized amount.
Title: folio ytm
Post by: TravelingPennies on March 02, 2016, 11:00:00 PM
Post by: TravelingPennies on March 02, 2016, 11:00:00 PM
Title: folio ytm
Post by: TravelingPennies on March 03, 2016, 11:00:00 PM
Post by: TravelingPennies on March 03, 2016, 11:00:00 PM
Title: folio ytm
Post by: TravelingPennies on March 03, 2016, 11:00:00 PM
Post by: TravelingPennies on March 03, 2016, 11:00:00 PM
Title: folio ytm
Post by: TravelingPennies on March 03, 2016, 11:00:00 PM
Post by: TravelingPennies on March 03, 2016, 11:00:00 PM
on folio, the reinvestment lag is not a big deal, probably worth the prepay bump if you are buying at a discount.
Any thoughts on maturity while we are at it? would a 36 mo loan with 24 months left be more desirable than a a new 36 mo loan at an equal ytm assuming no credit status degradation in the interim on the older note?
How about a 60 mo loan with 36 months left vs.a new 36 mo loan with all other credit history/info at ytms assumed to be equal.
Any thoughts on maturity while we are at it? would a 36 mo loan with 24 months left be more desirable than a a new 36 mo loan at an equal ytm assuming no credit status degradation in the interim on the older note?
How about a 60 mo loan with 36 months left vs.a new 36 mo loan with all other credit history/info at ytms assumed to be equal.
Title: folio ytm
Post by: RaymondG on March 03, 2016, 11:00:00 PM
Post by: RaymondG on March 03, 2016, 11:00:00 PM
Title: folio ytm
Post by: mfriedma on September 04, 2018, 11:00:00 PM
Post by: mfriedma on September 04, 2018, 11:00:00 PM
I think you all might be interested in the response I got from LendingClub when I e-mailed asking about the YTM calculation:
Additionally, I am unfamiliar XIRR and it is not what we utilize to calculate YTMs. Please note, we do not provide statistical support and I am unable to calculate the Yield to Maturity manually on your behalf.
To my knowledge you would not be able to use XIRR to arrive at our figures. Investors in the past that have successfully calculated our YTM have used Euler's method to compute the answer.
In case anyone is curious, Euler's Method is used to approximate differential equations.
Additionally, I am unfamiliar XIRR and it is not what we utilize to calculate YTMs. Please note, we do not provide statistical support and I am unable to calculate the Yield to Maturity manually on your behalf.
To my knowledge you would not be able to use XIRR to arrive at our figures. Investors in the past that have successfully calculated our YTM have used Euler's method to compute the answer.
In case anyone is curious, Euler's Method is used to approximate differential equations.
Title: folio ytm
Post by: Rob L on September 04, 2018, 11:00:00 PM
Post by: Rob L on September 04, 2018, 11:00:00 PM