Well, that'll teach me...

Coming back to this point, it's an interesting question.

I'm not the pure maths person you're looking for, but I have done some advantage gambling (stemming from matched betting, which is also v.interesting to the geeky if you haven't tried it) which reminds me of the situation here.

The theory there and here is that if an expected positive value can be calculated from taking on a bet at certain odds, (or a loan at certain interest rates) that, on average, you'll come out ahead. The rub (with both) is that you're going to experience volatile returns. One person could try it, experience no defaults, and therefore see it as a never-fail goldmine, whilst the next hapless chap could hit 2 defaulters immediately and be put off for life. Both have benefited from the same value, but one has 'won' the volatility stakes and the other has received the sharp end of the stick.

There are two key differences though:

1) It's nowhere near as easy to calculate  precise value in P2P. It's too new, platforms change the goalposts all the time meaning it's difficult (although not impossible) to build useful statistical models, and P2P could be drastically affected by external factors such as the economy going into recession. None of these apply to advantage gambling.

2) On the plus side, P2P markets are nowhere near as efficient as Casinos/sportsbooks and as such there are plenty of opportunities to 'do a georget' as I'll term it and find arbitrage opportunities everywhere - The standard one being "I'll buy lots of this crappy loan with a high interest rate, and sell at X days so I won't chance it defaulting' for asset backed loans. Even if you can't accurately put a value number on it, you can be pretty certain in some cases of a profitable strategy. The downside is that the markets tend to be alot less liquid than other places, and in some cases variable pricing is not possible as some Lendy 'gamers' are finding out to their possible cost.

But, just like advantage gambling, if you do find a strategy that really works then you're probably best keeping hush about it 

Pity the loan book doesn't tell you the default date otherwise we could do some analytics for the optimum time to "flip" within the month

I was being somewhat sarcastic. As FC give the loans a credit rating I would assume they had some liability in ensuring that the ratings reflect some definitions of reality.

Most likely FC are ramping out the low end loans in order to fill the order book before and IPO. They would need to IPO within the next 18 months before that particular house of cards collapses.

"Then today 37958 has been defaulted just three weeks after taking out the loan. Bang goes another £1600."

Do you mean defaulted or RBR? If defaulted, then they can't have gone off with the money before the first repayment because FC wouldn't know that yet. In either case, it may be a long drawn out whimper of recoveries rather than going off with a bang.

One to follow. A prima facie case of a loan which FC should not have made? Will they refund lenders? Do bears use public conveniences?

p2pindependentforum.com/post/187196

An update on the above post:

Using the same strategy, i.e. selling E’s after two weeks and all other grades before first payment due, no funds added but all interest and sale profits reinvested and FC's charges deducted, my wife’s FC account total increased from £X to £Y between 01/01/2017 and 01/07/2017 giving an annualised return of 11.71% without any theories or fancy calculations.