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Thread: Harmoney

  1. #2746
    Join Date
    May 2016


    Quote Originally Posted by Cool Bear View Post
    No. The second default table is already included in the first annual rate of return table. So if Harmoney's estimates are correct, it is still better to invest in the more risky D to F as the returns are in the 14 to 15%. However, Myles' working is based on an even spread of defaults. So the actuals will be a bit different.
    Yeah but, the variability of returns (ie risk) goes up as the grade increases. An expected return of 15% on a D grade is better than 15% on a E grade, you need a higher return to compensate for the higher risk. There's a difference between maximising and optimising return. Harmoney's pricing of loans should take this into account but to me feels, admittedly from a position of relative ignorance, under-cooked at the lower and upper ranges.

  2. #2747
    Join Date
    Sep 2012


    Quote Originally Posted by myles View Post
    The Hazard Curve shows a non-zero value for months 1 - 3 so perhaps it is the first non payment date?
    Yes, look at their Static Loss chart in the market stats. They start writing off after 3 to 5 months. They did state somewhere that it is usually 90 to 120 days after the last payment is received. But my point is if the borrower did not make any payment at all before the loan is written off, it is the same to us as being written off immediately on day one in our calculation of returns.

  3. #2748
    yeah, nah
    Join Date
    Mar 2017


    Quote Originally Posted by Cool Bear View Post
    look at their Static Loss chart in the market stats.
    Yep, I think the way Harmoney show it is appropriate. Static Loss chart - loans aren't a loss, until they are written off. Hazard Curve - when defaults occur i.e. first non-payment.

    The way I applied defaults in those previous tables (evenly distributed), would result in a Hazard Curve with a straight line across all 32 months at 3.125%, which, with the higher initial defaults with my method, would, I think, have a similar end result to the supplied Hazard Curve.

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