London Interbank Offered Rate

(noun)

the average interest rate estimated by leading financial instiutions in London that they would be charged if borrowing from others

Related Terms

Examples of London Interbank Offered Rate in the following topics:

  • Short-Term Loans

    • In this situation, the account is said to be "overdrawn. " If there is a prior agreement with the account provider for an overdraft, and the amount overdrawn is within the authorized overdraft limit, then interest is normally charged at the agreed rate.
    • These instruments are often benchmarked to the London Interbank Offered Rate (LIBOR) for the appropriate term and currency.
    • Bridge loans typically have a higher interest rate, points and other costs that are amortized over a shorter period, as well as various fees and other "sweeteners" like equity participation by the lender.

  • Options Contract

    • Interest rates affect options just like bonds and stock.
    • Currency options are similar to commodity options, but the strike price is an exchange rate.
    • First, Interbank (OTC) market is located in London, New York, and Tokyo, and the OTC options are tailor-made for size, maturity, and exercise price.Second, Philadelphia, United States has a market for currency options with fixed maturities at 1, 3, 6, and 12 months.
    • Scenario 1: If the exchange rate exceeds $0.3 US per ringgit, then the investor exercises the call option.
    • Scenario 1: If the exchange rate exceeds $0.8 US / euro, then the investors do not exercise the put option.