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Published: 25th March 2017 by William Webster
The London Interbank Offered Rate (LIBOR) is a short-term benchmark interest rate. From 01/02/14 it has been compiled by the Intercontinental Exchange (ICE). Every day, just before 11am London time, contributor banks, of which there are between 11 and 17, submit the rate at which they think they can borrow in the interbank market in reasonable size and for the currency and maturity in question. There are five currencies and seven maturities giving a total of 35 daily rates, each being an arithmetic average, after outlying high and low quotes have been removed. The rates are quoted to five decimal places and published at 11.55am London time.
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13th September 2009
If you borrow or save money at your local bank I expect the sums involved are normally small but when banks deal with each other the amounts are much larger. This market between banks for borrowing and lending cash is known as the interbank or money market. It allows banks with shortfalls to borrow and those with surpluses to lend. Imbalances like this occur everyday and every major currency has its own interbank market. It's at the core of the world's financial system and any disruption to it is potentially disastrous. Let's find out a little more.
15th September 2009
Forward rate agreements (FRAs) are contracts for difference. They are traded in the over-the-counter (bilateral or non-exchange) market. They allow the two parties involved to hedge or speculate on interest rates in the future. Perhaps the easiest way to understand a FRA is to break it down into a loan and deposit. Let's try.
16th March 2011
Basis risk - an update It's a salutary fact that the regulator has identified that firms that run relatively large basis risks are more prone to margin compression. That's because excessive basis risk reduces your control over the balance sheet and calls into question your risk management and governance. Ask a trader about basis risk and they will tell you it is to do with ineffective hedging. You may think of it as the risk between Libor and Bank rate. The fact is basis risk means different things to different people. So let's define it. In the following article basis risk is "the degree of control you have over the margins in your balance sheet". This may seem an unusual definition but all will become apparent.
31st March 2014
Money Markets • Pre and post 2007 • Maturity transformation • Regulatory response • Real money • Loans, deposits, CDs, CP, T-bills, reserve accounts • How markets changed