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Encyclopedia > London Interbank Offered Rate

London Interbank Offered Rate (or LIBOR, pronounced LIE-bore) is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the London wholesale money market (or interbank market). LIBOR is the opposite of the London Interbank Bid Rate (LIBID). A reference rate is any publicly available quoted number or value that is used by the parties to a financial contract. ... An interest rate is the price a borrower pays for the use of money he does not own, and the return a lender receives for deferring his consumption, by lending to the borrower. ... “Banker” redirects here. ... Unsecured loans are loans that are not guaranteed with any asset, so that the risk of repossession does not exist. ... This article is about short-term financing. ... This article or section is in need of attention from an expert on the subject. ... There are very few or no other articles that link to this one. ... The London Interbank Bid Rate (LIBID) is the rate bid by banks on Eurocurrency deposits (i. ...

Contents

Scope

LIBOR rates are widely used as a reference rate for financial instruments such as:

They thus provide the basis for some of the world's most liquid and active interest rate markets. This article needs to be cleaned up to conform to a higher standard of quality. ... In finance, a futures contract is a standardized contract, traded on a futures exchange, to buy or sell a certain underlying instrument at a certain date in the future, at a specified price. ... In the field of derivatives, a popular form of swap is the interest rate swap, in which one party exchanges a stream of interest for another partys stream. ... Floating rate notes (FRNs) are bonds that have a variable coupon, equal to a money market reference rate, like LIBOR or federal funds rate, plus a spread. ... A syndicated loan (or syndicated bank facility) is a large loan in which a group of banks work together to provide funds for a borrower. ... An adjustable rate mortgage (ARM), variable rate mortgage or floating rate mortgage is a mortgage loan where the interest rate on the note is periodically adjusted based on an index. ... The United States dollar is the official currency of the United States. ... In finance, the prefix euro as in eurodollars or euroyen refer to currency deposited outside the country of their origin. ...


For the Euro, however, the usual reference rates are the Euribor rates compiled by the European Banking Federation, from a larger bank panel. A Euro LIBOR does exist, but mainly for continuity purposes in swap contracts dating back to pre-EMU times. “EUR” redirects here. ... Euribor (Euro Interbank Offered Rate) is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the euro wholesale (or interbank) money market. ... The European Banking Federation (abbreviated FBE) is an organization of the European banking sector, representing interest of over 4,000 banks from EU Member States, Iceland, Norway and Switzerland. ... In economics, a monetary union is a situation where several countries have agreed to share a single currency among them. ...


Technical features

LIBOR is published by the British Bankers Association (BBA) shortly after 11:00 each day, London time, and is a filtered average of inter-bank deposit rates offered by designated contributor banks, for maturities ranging from overnight to one year. The shorter rates, i.e. up to 6 months, are usually quite reliable and tend to precisely reflect market conditions at measurement time. The actual rate at which banks will lend to one another will, however, continue to vary throughout the day. The British Bankers Association (BBA) is a trade association, which represents banks and other financial services firms, either British or foreign owned, that operate in the United Kingdom. ...


Apart from the US dollar and, of course Pound Sterling, currencies for which LIBOR is a significant reference rate currently include the Swiss Franc, the Yen, the Canadian dollar and the Danish Krone. “GBP” redirects here. ... ISO 4217 Code CHF User(s) Switzerland, Liechtenstein, Campione dItalia Inflation 1. ... Japanese 10 yen coin (obverse) showing Phoenix Hall of Byodoin Yen is the currency used in Japan. ... It has been suggested that this article or section be merged with Loonie. ... ISO 4217 Code DKK User(s) Denmark, Greenland, Faroe Islands 1 Inflation 1. ...


In the 1990s, Yen LIBOR rates were altered by credit problems affecting some, but not all, of the contributor banks. Japanese 10 yen coin (obverse) showing Phoenix Hall of Byodoin Yen is the currency used in Japan. ...


For a precise definition of BBA LIBOR, see the BBA website.


LIBOR-based derivatives

Eurodollar contracts

The Chicago Mercantile Exchange's Eurodollar contracts are based on three-month US dollar LIBOR rates. They are the world's most heavily traded short term interest rate futures contracts and extend up to 10 years. For the shorter maturities, fungible contracts trade on London's Euronext.liffe in European time and the Singapore Exchange in Asian time. President George W. Bush at the CME (March 6, 2001). ... In finance, the prefix euro as in eurodollars or euroyen refer to currency deposited outside the country of their origin. ... Euronext. ... Singapore Exchange (SGX) is the stock exchange in Singapore. ...


Interest Rate Swaps

Interest rate swaps based on short LIBOR rates currently trade on the interbank market for maturities up to 50 years. A "five year LIBOR" rate refers to the 5 year swap rate vs 3 or 6 month LIBOR. "LIBOR + x basis points", when talking about a bond, means that the bond's cash flows have to be discounted on the swaps' zero-coupon yield curve shifted by x basis points in order to equal the bond's actual market price. The day count convention for LIBOR rates in interest rate swaps is Actual/360. In the field of derivatives trading, a popular form of swap is the interest rate swap, in which one party exchanges a stream of interest for another stream. ... This article or section is in need of attention from an expert on the subject. ... The US dollar yield curve as of 9 February 2005. ... It has been suggested that Interest rate basis be merged into this article or section. ...


See also

Euribor (Euro Interbank Offered Rate) is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the euro wholesale (or interbank) money market. ... Tibor is a male name that comes from Hungary. ... In finance, leverage (or gearing) is using given resources in such a way that the potential positive or negative outcome is magnified. ... In finance, a margin is collateral that the holder of a position in securities, options, or futures contracts has to deposit to cover the credit risk of his counterparty. ...

External links


  Results from FactBites:
 
London Interbank Offered Rate - Wikipedia, the free encyclopedia (428 words)
London Interbank Offered Rate (or LIBOR) is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the London wholesale (or "interbank") money market.
For the Euro, however, the usual reference rates are the Euribor rates compiled by the European Banking Federation, from a larger bank panel.
LIBOR is published by the British Bankers Association (BBA) shortly after 11:00 each day, London time, and is a filtered average of inter-bank deposit rates offered by designated contributor banks, for maturities ranging from overnight to one year.
Temecula Mortgage - Temecula Valley Mortgage serving Temecula, California (2405 words)
As an example, if the current market rate for a conforming fixed rate loan is 8.5% at a cost of 1.5 points, the buydown gives the borrower a first year rate of 6.50%, a second year rate of 7.50% and a third through 30th year rate of 8.50% and the cost would be 4.5 points.
The qualifying rate is 5.75% and the negative amortization is 11.34% (approximately $17,010).
The note rate of a GPM is traditionally.5% to.75% higher than the note rate of a straight fixed rate mortgage.
  More results at FactBites »

 
 

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