LIBOR RATE RETURNS
If the three-month (91 days) Libor rate is 4% and the six-month (183 days) rate is 5%, what should be the 3°ø6 FRA rate? If, at the end of the contract, the three-month Libor rate turns out to be LIBOR was established as a standardized benchmark for the pricing of floating-rate5%, what should the settlement amount be? corporate loans.
However, LIBOR RATE RETURNS, its introduction coincided with the growth of new interest rate– based financial instruments—such as forward rate agreements and interest rate swaps—that also require standardized and transparent interest rate benchmarks. LIBOR is supposed to reflect reality—an average of what banks believe they would have to pay to borrow a “reasonable” amount of currency for a specified short period. That is, it what represents the cost of funds—although a bank may not actually have a need for the funds on any given day. But LIBOR has long been dogged by perceptions that the method for setting the rates is flawed and prone to distorted results during periods of market stress when banks stop lending to each other across the full maturity spectrum, from overnight to one year. LIBOR RATE RETURNS A more direct challenge to its authenticity came from attempts to manipulate LIBOR (and other benchmark rates) by the big British bank Barclays, for which it agreed in June 2012 to pay fines totaling about $450 million to regulators in the United Kingdom and the United States. But LIBOR has long been dogged by perceptions that the method for setting the rates is flawed and prone to distorted results during periods of market stress when banks stop lending to each other across the full maturity spectrum, from overnight to one year. A more direct challenge to its authenticity came from attempts to manipulate LIBOR (and other benchmark rates) by the big British bank Barclays, LIBOR RATE RETURNS for which it agreed in June 2012 to pay fines totaling about $450 million to regulators in the United Kingdom and the United States. Use APA referencing style.