Libor stands for
London interbank offered rate.
It refers to any of a number of short-term indicative interest rates
compiled by the British Bankers Association (BBA) at 11:00 AM London time
each business day. For a given currency and maturity, Libor represents the
simple interest rate at which banks are
willing to lend to each other. As a practical matter, it is the rate other
banks must pay to borrow.
Libor is quoted for very short term and monthly
maturities out to a year for the world's major currencies.
GBP Libor is quoted for a
cash loan on an actual/365
basis. For all other currencies, it is quoted for a
spot loan on an actual/360
basis. Spot is defined as two business days (two "target" days for the
euro). Rates are
available from Telerate news service page 3750. Libor rates are widely
used as underlying interest rates for
Use of the term "Libor" can be confusing. Usually, it
refers to the indicative rates compiled by the BBA. It may also refer to
any rate offered by one bank to another on a deposit. To avoid confusion,
people may speak of BBA Libor when
referring to the BBA's indicative rates.
As with most markets, the money markets have
bid-offer spreads. Libor rates are offered
rates. Libid rates are bid rates. Libid stands
for London interbank bid rate.
These are the rates banks bid for deposits. As a practical matter, Libid
is a rate other banks can expect to receive if they deposit excess cash.
The BBA does not compile indicative Libid rates.
Limean is the mid-market
rate—the average of Libor and Libid.
Euribor stands for
Euro interbank offered rate.
These interest rates for the Euro are compiled by the European Banking
Federation (FBE—Fédération Bancaire de l’Union Européenne) and are
released at 11:00 AM Brussels time, each business day. Rates are quoted
for one week and monthly maturities out to a year. They are available on
Telerate page 248. Euribor is more widely used than Euro Libor.