London Interbank Offered Rate (LIBOR)

Keith Tan

Benchmark interest rate at which major global banks lend to one another in the international interbank market for short-term loans.

LIBOR rates are published daily for several currencies (EUR, USD, GBP, JPY, CHF), and for different maturities of one day to one year.

The rates are based on the rates for unsecured loans from one bank to another in the interbank money market. An average is calculated from a survey of 18 banks’ expected borrowing rates in the interbank market, after excluding the highest and lowest quotes.

Often used as the reference rate for Floating-Rate Notes. The reference rate must match the currency of the bond, and frequency with which the coupon rate on the bond is reset (e.g. A USD-based FRN which pays interest semi-annually should use the 180-day USD LIBOR rate)

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