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Implicit rating: A potential new method to alert crisis on the interbank lending market

Edina Berlinger ()

Finance Research Letters, 2017, vol. 21, issue C, 277-283

Abstract: A new measure called “implicit rating” is introduced as a potential component of an early warning system. It relies on the aggregation of experts’ knowledge hidden in transactional data of the interbank market of unsecured loans. Banks simultaneously assess each other's creditworthiness which is reflected in partner limits and interest rates. In the Hungarian interbank market the overall trading volume and the average interest rate showed no negative trends before the crisis of 2008; however, the average implicit partner limit started to decrease several months earlier, hence it might serve as a stress indicator both at system and bank level.

Keywords: Financial crisis; Credit rationing; Counterparty risk; Partner limits; Network analysis (search for similar items in EconPapers)
JEL-codes: D85 E42 G01 G15 G21 (search for similar items in EconPapers)
Date: 2017
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Working Paper: Implicit rating: A potential new method to alert crisis on the interbank lending market (2016) Downloads
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