evaluating ytm

[mikedev10]

hey fellas, could use some help here;

first off i am curious as to why any notes are even listed for negative ytm or near 0 ytm, why would anyone purchase these at all?

my real challenge is in deciding what amount of ytm is "worth it" - there are A grade loans at 3, 4, 5% YTM, other values at B, and i'm having a hard time coming up with "draw the line here" which i assume is actually "draw the line here based on the default level of risk."

so rather than "buy A if ytm is 4.5 or above"

i'm thinking my rule should be "do something with original interest rate and months remaining, and if this is better or equal to ytm, and tm is 4.5 above, then buy"

am i overthinking this?  or is my rule for "this is still pricing default risk effectively" going to be much more arbitrary than a more standard calculation i'm expecting?

[Rob L]

You might find this interesting:

https://forum.lendacademy.com/index.php/topic,3979.0.html" class="bbc_link" target="_blank">https://forum.lendacademy.com/index.php/topic,3979.0.html

[TravelingPennies]

thanks.  seems like i have been overthinking it a bit and should just assume original risk is priced in and i should feel good purchasing a note at no markup or a discount, particularly if the credit rating has stayed neutral or gone up.

[Fred93]

https://forum.lendacademy.com/index.php?topic=5028.msg44127#msg88888888Quote"> from: mikedev10 on January 03, 2019, 03:26:11 PM

[Roux]

It is very difficult to match LC's YTM calculation exactly, however we have come extremely close. We have an in depth article on our blog explaining the formulas and process.

https://blog.liquidp2p.com/a-fair-trade-how-liquid-p2p-prices-lending-club-notes-for-the-secondary-market/" class="bbc_link" target="_blank">https://blog.liquidp2p.com/a-fair-trade-how-liquid-p2p-prices-lending-club-notes-for-the-secondary-market/

Within the article is another link to an amoritization schedule detailing LC's fees and their effect on YTM written by our Data Scientist.

https://www.liquidp2p.com/yield-calculation" class="bbc_link" target="_blank">https://www.liquidp2p.com/yield-calculation

[TravelingPennies]

https://forum.lendacademy.com/index.php?topic=5028.msg44129#msg88888888Quote"> from: Roux on January 04, 2019, 12:37:23 PM

[TravelingPennies]

https://forum.lendacademy.com/index.php?topic=5028.msg44130#msg88888888Quote"> from: Rob L on January 04, 2019, 02:26:29 PM

[TravelingPennies]

https://forum.lendacademy.com/index.php?topic=5028.msg44133#msg88888888Quote"> from: Roux on January 04, 2019, 09:31:29 PM

[TravelingPennies]

Rob L you are correct. We rounded the fees to the nearest whole cent, when we should have kept them to the tenth decimal place for our calculations. I did call LC Investor Services just to confirm this as well. Your spreadsheet is accurate, ours will need to be revised with lower LC investor fees. I would assume the two will match up once we correct it. Thank you for your detailed posts.