LIBOR

LIBOR is an acronym for London Inter-Bank Offer Rate. It is the benchmark at which banks lend funds to one another in the international interbank market for seven maturities ranging from overnights to 12 months which are 1 day, 1 week, 2 months, 3 months, 6 months, 12 months. There is a total of 35 different LIBOR rates each business day. The most important rate is the three-month dollar LIBOR. LIBOR is administered by the ICE Benchmark Administration (IBA) and is based in five currencies, which are U.S dollar (USD), Euro (EUR), pound sterling (GBP), Japanese yen (JPY) and Swiss franc (CHF).

For United States Dollar, each day a group of 18 leading banks including Citigroup, JPMorgan Chase submit the interest rates at which they are willing to lend to other banks. Then an average is calculated and LIBOR rate is decided.