Uncertain Mean-variance model for project selection in P2P online lending platforms

Abstract

The failure of P2P online lending platforms in China indicates that the failure of risk control is enough to lead to the bankruptcy of a large company, and even trigger a chain reaction leading to financial crisis. This paper discusses the optimal project selection for a P2P online lending platform. We use uncertain variables to describe the borrower’s default amount and provide the distribution of the default amount through experts’ estimation. And then, we establish a mean-variance model of project selection for P2P network lending platforms and give the model a crisp form. The model considers maximum revenue and minimum risk as decision-making conditions, which can not only promote the sustainable operation of the platform, but also protect the interests of investors. Finally, we use a numerical example to prove the validity of our model.