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Orchestration of Federated Risk for P2P Lending Platforms: A Multi-Agent Systems (MAS) Approach

Saravanan Muthaiyah, Lan Thi Phuong Nguyen, Yap Voon Choong, Thein Oak Kyaw Zaw

Abstract


Federated risk management in the context of Peer-to-Peer (P2P) lending should be a collaborative approach with multiple autonomous entities (i.e. agent systems) working together to assess, monitor, and mitigate risks. Orchestration of these agents is crucial in facilitating risk evaluation, surveillance, and mitigation tactics. By employing Multi-Agent Systems (MAS), the orchestration of risk, regulatory compliance, and stakeholders' interests are better protected. The framework of federated risk management in P2P lending aims to address challenges and risks inherent in decentralized platforms. In recent years, the P2P lending industry has experienced significant growth, attracting both borrowers and investors seeking an alternative financial system. However, this growth has exposed the industry to various risks, including credit risk, fraud, and information asymmetry. As a result, the need for a robust risk management framework has become increasingly critical. In this paper, we delve into the role of intelligent agents and their protocol for collaborative dynamics that uses the portfolio's return (Rp) and the risk-free rate (Rf), divided by the standard deviation of the portfolio's excess return (σp) for various investment portfolios. Our framework allows MAS to analyze data from diverse sources, default rates, payback history, and portfolio risks to propose adaptive strategies for risk mitigation.

 

Doi: 10.28991/HIJ-2024-05-04-06

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Keywords


P2P Lending; Multi Agent Systems (MAS); Risk Free Rate; Portfolio Excess Return.

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Full Text: PDF

DOI: 10.28991/HIJ-2024-05-04-06

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