Credit Risk Meets Large Language Models: Building a Risk Indicator from Loan Descriptions in P2P Lending. (arXiv:2401.16458v1 [q-fin.RM])

Peer-to-peer (P2P) lending has emerged as a distinctive financing mechanism,
linking borrowers with lenders through online platforms. However, P2P lending
faces the challenge of information asymmetry, as lenders often lack sufficient
data to assess the creditworthiness of borrowers. This paper proposes a novel
approach to address this issue by leveraging the textual descriptions provided
by borrowers during the loan application process. Our methodology involves
processing these textual descriptions using a Large Language Model (LLM), a
powerful tool capable of discerning …

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