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3-month LIBOR is generally a floating rate of financing, which fluctuates depending on how risky a lending bank feels about a borrowing bank. The OIS is a swap derived from the overnight rate, which is generally fixed by the local central bank. The OIS allows LIBOR-based banks to borrow at a fixed rate of interest over the same period.
Interest rate swaps based on short Libor rates traded on the interbank market for maturities up to 50 years. In the swap market, a "five-year Libor" rate referred to the five-year swap rate, where the floating leg of the swap referenced the three- or six-month Libor (this can be expressed more precisely as for example "5-year rate vs 6-month ...
In addition, unlike the forward-looking LIBOR (which can be calculated for 3, 6 or 12 months into the future), SOFR is calculated based on past transactions, which limits the rate's predictive value on future interest rates. [1] In addition, SOFR is overnight, whereas LIBOR can have longer tenors.
In another sign of concern brewing in money markets, analysts cited three-month Libor, which rose to 12.5 basis points, a four-week peak, according to Refinitiv data, which may reflect some stress ...
One-month LIBOR is the rate offered for 1-month deposits, 3-month LIBOR for three months deposits, etc. LIBOR rates are determined by trading between banks and change continuously as economic conditions change. Just like the prime rate of interest quoted in the domestic market, LIBOR is a reference rate of interest in the international market.
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For interest rate swaps, the Swap rate is the fixed rate that the swap "receiver" demands in exchange for the uncertainty of having to pay a short-term (floating) rate, e.g. 3 months LIBOR over time. (At any given time, the market's forecast of what LIBOR will be in the future is reflected in the forward LIBOR curve.)
The London Interbank Offered Rate or Libor, once dubbed the world's most important number, will be replaced at the end of December with "risk free" rates compiled by central banks.