Libor and Euribor

<body onLoad="MM_checkPlugin('Shockwave Flash','','http://www.riskglossary.com/default_nofl.htm',false);return document.MM_returnValue" stylesrc="../_private/template.htm" bgcolor="#FFFFFF" link="#669933" vlink="#000000" alink="#000000"> <div align="left"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table2"> <tr> <td width="740"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" height="37" id="table3"> <tr> <td height="35" width="100%"> <table border="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="0" id="table4"> <tr> <td width="100%" align="left" valign="top"> <p class="header_gold">Libor and Euribor</td> <td width="45" align="right" valign="bottom"> <map name="FPMap6"> <area href="http://www.contingencyanalysis.com" shape="rect" coords="1, 0, 44, 11" target="_top"> </map> <img border="0" src="../images/home.gif" usemap="#FPMap6" width="45" height="12"></td> </tr> </table> </td> </tr> <tr> <td width="100%" bgcolor="#CC9966" height="2"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> </tr> <tr> <td width="0%" valign="top" bgcolor="#FFFFCC"> <table border="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="0" cellspacing="1" id="table5"> <tr> <td width="0%" align="left" valign="top"> <p class="header2_black">Explained:<br> <img border="0" src="../images/blank_1x100.gif" width="100" height="1"></td> <td width="100%" align="left" valign="top"><p class="word_list"> <a href="#Euribor">Euribor</a><p class="word_list"> <a href="#Euro Interbank Offered Rate">Euro interbank offered rate</a><p class="word_list"> <a href="#Libid">Libid</a><p class="word_list"> <a href="#Libor">Libor</a><p class="word_list"> <a href="#Limean">Limean</a><p class="word_list"> <a href="#London interbank bid rate">London interbank bid rate</a><p class="word_list"> <a href="#London Interbank Offered Rate">London interbank offered rate</a><br> <img border="0" src="../images/blank_1x160.gif" width="160" height="1"></td> </tr> </table> </td> </tr> </table> <table border="0" cellpadding="0" style="border-collapse: collapse" bordercolor="#111111" width="310" align="left" id="table6"> <tr> <td width="300" height="14"><font size="2"> </font><font size="4"> </font></td> <td width="9" height="14"></td> </tr> <tr> <td width="300"> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script>  </td> <td width="9"> </td> </tr> </table> <p class="body"><b><a name="Libor">Libor</a></b> stands for <b> <a name="London Interbank Offered Rate">London interbank offered rate</a></b>. 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 <a href="../articles/compounding.htm">simple interest rate</a> at which banks are willing to lend to each other. As a practical matter, it is the rate other banks must pay to borrow. </p> <p class="body">Libor is quoted for very short term and monthly maturities out to a year for the world's major currencies. <a href="../articles/currency_codes.htm">GBP</a> Libor is quoted for a <a href="../articles/fixed_income_term_structure.htm">cash loan</a> on an actual/365 basis. For all other currencies, it is quoted for a <a href="../articles/fixed_income_term_structure.htm">spot loan</a> 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 <a href="../articles/derivative_instrument.htm">underlying</a> interest rates for <a href="../articles/derivative_instrument.htm">derivative</a> contracts. </p> <p class="body">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 <b><a name="BBA Libor">BBA Libor</a></b> when referring to the BBA's indicative rates.</p> <table border="0" cellpadding="0" style="border-collapse: collapse" bordercolor="#111111" width="310" align="right" id="table7"> <tr> <td align="right" width="9"> </td> <td width="300"> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script>  </td> </tr> </table><p class="body">As with most markets, the money markets have <a href="../articles/spreads.htm">bid-offer spreads</a>. Libor rates are offered rates. <b><a name="Libid">Libid</a></b> rates are bid rates. Libid stands for <b><a name="London interbank bid rate">London interbank bid rate</a></b>. 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.</p> <p class="body"><b><a name="Limean">Limean</a></b> is the mid-market rate—the average of Libor and Libid.</p> <p><b><a name="Euribor">Euribor</a></b> stands for <b> <a name="Euro Interbank Offered Rate">Euro interbank offered rate</a></b>. 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. 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