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Libor

Libor

LIBOR stands for the London InterBank Offered Rate. It is also termed as ICE LIBOR these days because the Inter Continental Exchange or ICE governs this rate. It describes the average rate of interest, estimated by banks in London for borrowing from other banks on fixed terms. LIBOR was first controlled by the British Bankers Association or BBA but it then passed on the responsibility to ICE after some legal issues.

LIBOR rates are calculated in five currencies. They are also given for seven different borrowing periods. This means that a total of 35 rates have to be published by ICE. Different financial institutions around the world use these rates in order to calculate their own interest rates and conditions. It is in fact the most important benchmark for calculating the value of short term loans and securities.

The Details of LIBOR

The LIBOR rates are issued in the US Dollar, British Pound, Euro, Swiss Franc and the Japanese Yen. There are seven different loan periods as well, which include one day, one week, one month, two months, three months, six months and 12 months.

Method of Calculation

ICE calculates LIBOR rates in a rigorous manner. These rates are published through Thomson Reuters. It acts as an important index used by most financial institutions around the world. A global panel of banks is surveyed each day to find out about the rates at which they could borrow funds. The organization then eliminates the extreme ends of the survey entries by taking out the four maximum and four minimum value interest rates. There are a total of 18 banks and the average response of the mean population of ten banks is published by the ICE organization.

It is important to understand that LIBOR serves as an index. The most commonly used LIBOR is the three months US Dollar LIBOR, which is used around the world for important financial calculations. The rates are usually dependent on the time of maturity which means there is a higher interest for longer termed loans.

Who Uses LIBOR?

LIBOR rates are used by many lending facilities around the world, as well as by organizations responsible for generating securities. LIBOR values are used as a reference in calculating the interest on private and public bonds as well as employed to describe mortgage rates and student loans. The rates of credit card loans also follow these values and they can even be used to find out if it is better to perform certain business transactions in Euros or in US Dollars.


Further Reading

Tracking the Libor rateTracking the Libor rate
www.tandfonline.com [PDF]
… we need objective-predictive ways to track the behaviour of important economic indicators such … data collection by Susan Press and support from the Giannini Foundation of Agricultural Economics … Source: For Libor data, historial 1 month Libor rates, British Bankers Association …

Reforming LIBOR and other financial market benchmarksReforming LIBOR and other financial market benchmarks
www.aeaweb.org [PDF]
… we need objective-predictive ways to track the behaviour of important economic indicators such … data collection by Susan Press and support from the Giannini Foundation of Agricultural Economics … Source: For Libor data, historial 1 month Libor rates, British Bankers Association …

LIBOR: Origins, economics, crisis, scandal, and reformLIBOR: Origins, economics, crisis, scandal, and reform
papers.ssrn.com [PDF]
… we need objective-predictive ways to track the behaviour of important economic indicators such … data collection by Susan Press and support from the Giannini Foundation of Agricultural Economics … Source: For Libor data, historial 1 month Libor rates, British Bankers Association …

On arbitration, arbitrage and arbitrariness in financial markets and their governance: Unpacking LIBOR and the LIBOR scandalOn arbitration, arbitrage and arbitrariness in financial markets and their governance: Unpacking LIBOR and the LIBOR scandal
www.tandfonline.com [PDF]
… we need objective-predictive ways to track the behaviour of important economic indicators such … data collection by Susan Press and support from the Giannini Foundation of Agricultural Economics … Source: For Libor data, historial 1 month Libor rates, British Bankers Association …

The impact of the global financial crisis on the cross-currency linkage of LIBOR–OIS spreadsThe impact of the global financial crisis on the cross-currency linkage of LIBOR–OIS spreads
www.sciencedirect.com [PDF]
… we need objective-predictive ways to track the behaviour of important economic indicators such … data collection by Susan Press and support from the Giannini Foundation of Agricultural Economics … Source: For Libor data, historial 1 month Libor rates, British Bankers Association …

Econometric analysis of European LIBOR-based options within Affine Term-Structure Models.Econometric analysis of European LIBOR-based options within Affine Term-Structure Models.
elibrary.ru [PDF]
… we need objective-predictive ways to track the behaviour of important economic indicators such … data collection by Susan Press and support from the Giannini Foundation of Agricultural Economics … Source: For Libor data, historial 1 month Libor rates, British Bankers Association …

LIBOR: origins, economics, crisis, scandal and reformLIBOR: origins, economics, crisis, scandal and reform
ideas.repec.org [PDF]
… we need objective-predictive ways to track the behaviour of important economic indicators such … data collection by Susan Press and support from the Giannini Foundation of Agricultural Economics … Source: For Libor data, historial 1 month Libor rates, British Bankers Association …

LIBOR vs. OIS: The derivatives discounting dilemmaLIBOR vs. OIS: The derivatives discounting dilemma
papers.ssrn.com [PDF]
… we need objective-predictive ways to track the behaviour of important economic indicators such … data collection by Susan Press and support from the Giannini Foundation of Agricultural Economics … Source: For Libor data, historial 1 month Libor rates, British Bankers Association …

New and robust drift approximations for the LIBOR market modelNew and robust drift approximations for the LIBOR market model
www.tandfonline.com [PDF]
… we need objective-predictive ways to track the behaviour of important economic indicators such … data collection by Susan Press and support from the Giannini Foundation of Agricultural Economics … Source: For Libor data, historial 1 month Libor rates, British Bankers Association …


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