dc.description.abstract | The importance of interbank rates for unsecured funding has increased vastly the last decades with
the expansion of nancial instruments. Today's interbank rates are arguably the most in
uential
benchmarks in pricing of assets and an important indicator on the state an economy. In the
aftermath of the nancial crisis, the awareness of weaknesses of interbank rates surfaced. The
awareness has led to a tightening of the regulations regarding the Norwegian Interbank O ered
Rate (NIBOR). The purpose of this paper is to identify the nature of NIBOR in both a domestic
and international context, and expand on NIBOR's ability to accurately re
ect the lending cost
between Norwegian prime banks. The rst part of the paper uses the Nelson-Siegel and Vasicek
models to compare o ered rates against observable nancing cost using unsecured corporate bonds.
NIBOR has historically been quoted higher than both STIBOR and EURIBOR, and we nd that
Norwegian banks contributing to NIBOR and STIBOR face the same nancing costs as European
banks contributing to EURIBOR. This implies that the di erences between interbank rates cannot
be justi ed by higher nancing costs. When comparing the interbank rates to domestic nancing
costs, we are unable to determine if banks contributing to NIBOR are more or less accurate in the
Norwegian interbank market compared to other interbank markets where these banks are present.
In the second part of the paper, we compare individual interest rate quotes to credit default
swaps, and observe an inconsistent relationship between panel banks' quotes and their market
priced risk over time. By applying a hidden markov model, we examine individual short term
behavioral dynamics during the opening of the day, and preceding the xing. Our results indicate
that interpretation of information varies across participants, which is a possible weakness of the
governance structure. | nb_NO |