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.

RELATED FAQS

  1. How does a high discount rate affect the economy?

    Find out what would happen if the Federal Reserve decided to set a very high discount rate, the rate at which banks can borrow ...
  2. How do economies of scale work with globalization?

    Discover how globalization can lead to unprecedented economies of scale for firms across the world, leading to higher global ...
  3. What is arbitrage pricing theory?

    Find out what arbitrage pricing theory is and how it can theoretically be used by investors to generate risk-free profit ...
  4. How does the Federal Reserve determine the discount rate?

    Learn about the several different kind of discount rates offered to banks and other depository institutions through the Federal ...
RELATED TERMS
  1. Nordic Model

    The social welfare and economic systems adopted by Nordic countries.
  2. Fee Harvesting Card

    Credit cards targeted at consumers with poor credit scores that ...
  3. Zero Percent

    A promotional rate of interest used to entice consumers, often ...
  4. Penalty Repricing

    An increase in a credit card’s interest rate that occurs when ...
  5. Universal Default

    A practice whereby a credit card issuer increases a credit card ...
  6. Wall Street Journal Prime Rate

    An interest rate that large banks in the United States charge ...

You May Also Like

Related Articles
  1. Economics

    No Exit: What Could Happen If the Eurozone ...

  2. Investing

    Reassessing Your Approach To Bond Investing

  3. Economics

    What Is Happening To The BRIC Economies?

  4. Economics

    The Economic and Social Effects of Corruption

  5. Investing

    Will 2015 Finally Be The Year For Rising ...

Trading Center