<p>it is measured by the swap spread, the difference between the 3-month bank bill swap rate (BBSW3M) or 3-month bank bill rate and the 3-month overnight indexed swap rates (OIS3M) captures the inherent bank credit risk and therefore funding liquidity in the inter-bank lending market.</p>

CC BY-SA 4.0
2018-07-12T01:32:13.313Z
2018-07-12T01:32:13.313Z
hengbin zhang
<p>I'm stuck on how to estimate the credit (counterparty) risk in interbank lending in the Australian market. TED spread is usually measured as the difference between the LIBOR rate and the T-bill rate. However, when I use the same framework to calculate the Australian TED spread, it is often negative. I use two methods:
1. 3-month BBSW (bank bill swap rate) -  3-month bank bill rate (or cash rate)
2. 3-month LIBOR in Australian Dollar - 3-month bank bill rate (or cash rate)</p>

<p>The negative value definitely makes no sense as the former should always be larger than the risk-free rate.</p>

<p>Can anyone illuminate how this works? or did I use the wrong proxy?</p>

<finance>
how to measure the funding liquidity, i.e., equivalent U.S. TED spread, in the Australian market?
chris
# how to measure the funding liquidity, i.e., equivalent U.S. TED spread, in the Australian market?

(Asked by: username_0 on 2018-07-11)

I'm stuck on how to estimate the credit (counterparty) risk in interbank lending in the Australian market. TED spread is usually measured as the difference between the LIBOR rate and the T-bill rate. However, when I use the same framework to calculate the Australian TED spread, it is often negative. I use two methods:
1. 3-month BBSW (bank bill swap rate) - 3-month bank bill rate (or cash rate)
2. 3-month LIBOR in Australian Dollar - 3-month bank bill rate (or cash rate)

The negative value definitely makes no sense as the former should always be larger than the risk-free rate.

Can anyone illuminate how this works? or did I use the wrong proxy?

**Tags:** finance

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## 1 answers

### Answer by username_1 on 2018-07-12. Score: 2

it is measured by the swap spread, the difference between the 3-month bank bill swap rate (BBSW3M) or 3-month bank bill rate and the 3-month overnight indexed swap rates (OIS3M) captures the inherent bank credit risk and therefore funding liquidity in the inter-bank lending market.


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