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LIBOR stands for London interbank offered rate. Banks in London, similar to the United States, can exchange money between banks. LIBOR is the rate at which banks borrow funds from other banks in the London interbank market.
LIBOR Calculation
LIBOR is an average of actual rates used by banks. To calculate LIBOR, the British Banker's Association (BBA), surveys a variety of banks that reflect the general market. The BBA then surveys the different banks' interbank interest rate quotes. These quotes are made available to the public.
The top and bottom quartile of the quotes are discarded, and the remaining interest rate quotes are averaged to form the daily LIBOR. LIBOR is calculated daily at 11:00 am London time or 6:00 am eastern time. Because LIBOR is an average of quotes and only calculated daily, the actual rates used between banks may fluctuate from the specific LIBOR rate. However, LIBOR provides a good approximation of the actual rates being used. This approximation is normally more accurate for short-term LIBOR rates and less accurate for long-term LIBOR rates.
LIBOR Rates
LIBOR rates are provided for periods of up to 12 months. The most common rates are the daily, weekly, one month, six month, and one year. LIBOR rates are also provided in ten currencies, including the US dollar, Japanese yen, Euro, and Pound Sterling. The Financial Times displays current LIBOR rates in multiple currencies.
LIBOR Applications
LIBOR is an important rate that influences many financial instruments. In addition to providing an interbank lending rate and baseline for other lending rates, LIBOR also influences derivatives. Eurodollar futures and interest rate swaps are derivatives that are influenced significantly by LIBOR.
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Where can one find the five year LIBOR rate?
This link from the Wall Street Journal has the five year Libor swaps rate
What is 3 month libor?
Libor stands for London Interbank Offered Rate. The 3-month LIBOR is the rate that major banks would be charged to borrow money from other banks for a three month period.
What is the current 6 month LIBOR rate?
About 0.48
What is the Libor rate?
LIBOR is the interest rate that banks charge each other for one-month, three-month, six-month and one-year loans. LIBOR is an acronym for London InterBank Offered Rate. This rate is that which is charged by London banks, and is then published and used as the benchmark for banks rates all over the world.
Why is the libor always higher than the libid?
Libor is London Inter-bank Offer Rate and Libid is London Inter-bank Bid Rate. Libor is always higher than Libid. If banks use Libor to lend (ask) and Libid to buy (bid) how come that while one bank expects to get a higher rate while lending hope to get a lower rate while borrowing? While one bank buys the other sells; while it is a bid rate to one it is offer rate to the other! How is it that this market function? Is it because the bid rate is expected to decrease within a day and the offer rate expected to increase simultaneously to keep-up with the margins in the inter-bank market?
