Choice of Rating Technology and Loan Pricing in Imperfect Credit Markets
Accurate rating systems are of central importance for banks to price and manage their loan portfolios. A bank's choice to invest in a more accurate rating technology is based on a trade-off: the better rating system usually comes at higher cost, but endows the bank with a competitive advantage, whic...| Link(s) zu Dokument(en): | IHS Publikation |
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| Hauptverfasser: | , , , , |
| Format: | Article in Academic Journal PeerReviewed |
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Incisive Media
2014
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| Zusammenfassung: | Accurate rating systems are of central importance for banks to price and manage their loan portfolios. A bank's choice to invest in a more accurate rating technology is based on a trade-off: the better rating system usually comes at higher cost, but endows the bank with a competitive advantage, which includes potentially better access to funds. This paper models the rating technology choice of a bank as a two-stage game in an oligopolistic banking sector. (author's abstract) |
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