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

Edina Berlinger ()

Corvinus Economics Working Papers (CEWP) from Corvinus University of Budapest

Abstract: A new measure called “implicit rating” is introduced which might be a component of an early warning system. The proposed methodology relies on the aggregation of experts’ knowledge hidden in the transactional data of the interbank market of unsecured loans. Banks are simultaneously assessing the creditworthiness of each other which is reflected in the partner limits and in the interest rates. In the Hungarian interbank market the overall trading volume and the average interest rate did not show any 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.

Keywords: financial crisis; credit rationing; counterparty risk; partner limits; risk adjusted interest rate; network analysis (search for similar items in EconPapers)
JEL-codes: D85 E42 G01 G15 G21 (search for similar items in EconPapers)
Date: 2016-01-20
New Economics Papers: this item is included in nep-ban and nep-mac
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Journal Article: Implicit rating: A potential new method to alert crisis on the interbank lending market (2017) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:cvh:coecwp:2016/04

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