A temporal network analysis reveals the unprofitability of arbitrage in The Prosper Marketplace

  • Authors:
  • U. Redmond;P. Cunningham

  • Affiliations:
  • UCD CASL, Belfield Office Park, Clonskeagh, Dublin 14, Ireland;UCD CASL, Belfield Office Park, Clonskeagh, Dublin 14, Ireland

  • Venue:
  • Expert Systems with Applications: An International Journal
  • Year:
  • 2013

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Abstract

There is an increasing focus on methods for network data analysis that consider temporal aspects of the data. We propose a method of network analysis based on the idea of a time-respecting subgraph composed of paths of consecutive edge activations. We present an algorithm to identify these structures and apply the algorithm to a network comprising data from The Prosper Marketplace, an online peer-to-peer lending system. To examine the flow of funds in the network, we extract time-respecting subgraphs. In the larger time-respecting structures, some members act as both borrowers and lenders, possibly attempting to profit from the difference between interest rates of incoming and outgoing loans. We present an analysis of the distribution of time-respecting structures over the lifetime of The Prosper Marketplace and we examine some structures in detail to show that they do represent arbitrage.