London Interbank Offered Rate - LIBOR
An interest rate at which banks can borrow funds, in marketable size, from other banks in the London interbank market. The LIBOR is fixed on a daily basis by the British Bankers' Association. The LIBOR is derived from a filtered average of the world's most creditworthy banks' interbank deposit rates for larger loans with maturities between overnight and one full year.
Investopedia Commentary
The LIBOR is the world's most widely used benchmark for short-term interest rates. It's important because it is the rate at which the world's most preferred borrowers are able to borrow money. It is also the rate upon which rates for less preferred borrowers are based. For example, a multinational corporation with a very good credit rating may be able to borrow money for one year at LIBOR plus 4 or 5 points.
Countries that rely on the LIBOR for a reference rate include the United States, Canada, Switzerland and, of course, England.
Related Links
Corporate Use of Derivatives for Hedging
See also: British Bankers Association - BBA, Euro Interbank Offer Rate - EURIBOR, Euro LIBOR, Euro Overnight Index Average - EONIA, Eurocurrency, Interest Rate, London Interbank Bid Rate - LIBID, Maturity
Also spelled: London Inter-bank Offer Rate, London Interbank Offer Rate, London Inter-bank offered Rate, leeborLIBOR