What is the difference between LIBID and LIBOR?

By Chizoba Morah AAA
A:

Both LIBID and LIBOR are rates primarily used by banks in the London interbank market. The London interbank market is a wholesale money market in London where banks exchange currencies either directly or through electronic trading platforms.

The acronym LIBID stands for London Interbank Bid Rate. It is the bid rate that banks are willing to pay for eurocurrency deposits in the London interbank market. Eurocurrency deposits refer to money in the form of bank deposits of a currency outside the country that issued the currency. However, eurocurrency deposits may be of any currency in any country. The most common currency deposited as eurocurrency is the US dollar. For example, if US dollars are deposited in a European bank or any bank outside the U.S, then the deposit is referred to as a eurocurrency.

LIBOR stands for London InterBank Offered Rate. LIBOR is the interest rate at which banks borrow money from other banks in the London interbank market. The LIBOR is set on a daily basis by the British Bankers' Association. The LIBOR is derived from a filtered average of the world's most creditworthy banks' interbank deposit rates for larger loans with maturities between overnight and one full year. LIBOR is the most widely used point of reference for short-term investment interest rates.

To learn more, see An Introduction To LIBOR.

This question was answered by Chizoba Morah.

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