LIBOR RATES Meaning and
Definition
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LIBOR rates, also known as the London Interbank Offered Rate, are benchmark interest rates that are used as a reference for a wide range of financial transactions worldwide. LIBOR rates represent the average interest rates at which major banks can borrow funds from one another in the London interbank market.
Specifically, LIBOR rates are published daily and are determined by a panel of banks who submit their borrowing costs to the Intercontinental Exchange (ICE). The ICE then calculates the average of these submissions, excluding a predetermined percentage of the highest and lowest rates, to arrive at the LIBOR rate for each currency and maturity period.
LIBOR rates are commonly utilized in financial contracts, such as loans, derivatives, and mortgages, to determine interest payments. They serve as a global reference point, reflecting the creditworthiness and liquidity in the international banking system.
These rates are published for various currencies and different maturity periods, typically ranging from overnight to one year. The most widely used LIBOR rates are the three-month rates, which provide an indication of the cost of unsecured borrowing over three months for the respective currency.
However, LIBOR rates have faced criticism and regulatory scrutiny due to concerns about manipulation and lack of transparency. As a result, efforts have been made to transition away from LIBOR rates to alternative benchmarks, like the Secured Overnight Financing Rate (SOFR), in order to ensure a more robust and reliable reference rate for financial markets.
Common Misspellings for LIBOR RATES
- kibor rates
- pibor rates
- oibor rates
- lubor rates
- ljbor rates
- lkbor rates
- lobor rates
- l9bor rates
- l8bor rates
- livor rates
- linor rates
- lihor rates
- ligor rates
- libir rates
- libkr rates
- liblr rates
- libpr rates
- lib0r rates
- lib9r rates
- liboe rates
Etymology of LIBOR RATES
The term "LIBOR" stands for the London Interbank Offered Rate. It is an acronym derived from the words "London" and "Interbank Offered Rate".
The London Interbank Offered Rate is the average interest rate estimated by leading banks in London that they would be charged if borrowing from other banks. LIBOR rates are widely used as a benchmark for short-term interest rates in various financial instruments and lending transactions.
The term "rates" in "LIBOR rates" simply refers to the interest rates being determined based on the LIBOR benchmark.
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