The London Interbank Offered Rate (LIBOR) is the reference interest rate for tens of millions of contracts worth more than USD 240 trillion, ranging from complex derivatives to residential mortgages. LIBOR is also hardwired into all manner of financial activity, such as risk, valuation, performance modelling and commercial contracts. It has been called the “world’s most important number”.
However, significantly reduced volumes of interbank unsecured term borrowing, which is the basis for LIBOR, is calling into question its ability to continue playing this central role.
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The London Interbank Offered Rate (LIBOR) is the reference interest rate for tens of millions of contracts worth more than USD 240 trillion, ranging from complex derivatives to residential mortgages. LIBOR is also hardwired into all manner of financial activity, such as risk, valuation, performance modelling and commercial contracts. It has been called the “world’s most important number”.
However, significantly reduced volumes of interbank unsecured term borrowing, which is the basis for LIBOR, is calling into question its ability to continue playing this central role.