LIBOR, LIBID and LIMEAN are all reference rates used to benchmark short-term interest rates. The London Interbank Offered Rate (LIBOR) is the rate at which banks can borrow unsecured funds from other banks in the Londoninterbank market. The London Interbank Bid Rate (LIBID), on the other hand, is the rate that banks are willing to pay for unsecured funds from other banks in the London interbank market. Both these rates (especially LIBOR) are considered the foremost global reference rates for short-term interest rates. They are derived from a filtered average of the world's most credit-worthy banks' interbank bid/ask rates for institutional loans with maturities that range between overnight and one year.

The London Interbank Mean Rate (LIMEAN) is considered the mid-market rate in the London Interbank market. LIMEAN is the calculated average between LIBOR and LIBID and can be used to identify the spread between the two rates. LIMEAN is also used by institutions borrowing and lending money in the interbank market (rather than using LIBOR or LIBID), and is a reliable reference to the rate most indicative of the interbank market.

LIBOR and LIBID are both calculated and published daily. However, unlike LIBID, which has no formal correspondent responsible for fixing it, LIBOR is set and published daily at 6am EST (11am in London) by the British Bankers' Association. LIBOR is also used extensively as a key reference rate for a variety of global financial instruments such as short-term interest futures contracts, forward rate agreements, interest rate swaps and currency options. LIBOR is also a key driver in the Eurodollar market, because it is used as the reference rate for valuing eurodollar futures contracts. (To learn more about LIBOR, read An Introduction To LIBOR.)

This question was answered by Lovey Grewal

  1. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  2. What are the best ways to sell an annuity?

    The best ways to sell an annuity are to locate buyers from insurance agents or companies that specialize in connecting buyers ... Read Full Answer >>
  3. How can the federal reserve increase aggregate demand?

    The Federal Reserve can increase aggregate demand in indirect ways by lowering interest rates. Aggregate demand is a measure ... Read Full Answer >>
  4. How does the stock market react to changes in the Federal Funds Rate?

    The stock market reacts to changes in the federal funds rate in various ways depending on where it is in the business cycle. ... Read Full Answer >>
  5. How do futures contracts roll over?

    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
  6. When has the United States run its largest trade deficits?

    In macroeconomics, balance of trade is one of the leading economic metrics that determines the trading relationship of a ... Read Full Answer >>
Related Articles
  1. Investing

    The ABCs of Bond ETF Distributions

    How do bond exchange traded fund (ETF) distributions work? It’s a question I get a lot. First, let’s explain what we mean by distributions.
  2. Investing

    Latin America’s Economic Forecast

    After a ten-year run, the economies of Latin America are in a decline. For sustainable, long-term growth, the region needs structural reforms.
  3. Economics

    Why the Euro Failed to Become the World's Reserve Currency

    Examine the current state of the U.S. dollar as the world's reserve currency; learn the major reasons why the euro has failed to replace it in that capacity.
  4. Investing News

    Are Stocks Cheap Now? Nope. And Here's Why

    Are stocks cheap right now? Be wary of those who are telling you what you want to hear. Here's why.
  5. Economics

    These Will Be the World's Top Economies in 2020

    Discover the current economic forces that are anticipated to significantly shift the landscape of the world's most powerful economies over the next decade.
  6. Investing Basics

    What Does Plain Vanilla Mean?

    Plain vanilla is a term used in investing to describe the most basic types of financial instruments.
  7. Fundamental Analysis

    Emerging Markets: Analyzing Colombia's GDP

    With a backdrop of armed rebels and drug cartels, the journey for the Colombian economy has been anything but easy.
  8. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  9. Investing

    Oil: Why Not to Put Faith in Forecasts

    West Texas Intermediate oil futures have recently made pronounced movements. What do they bode for the world market?
  10. Options & Futures

    Pick 401(k) Assets Like A Pro

    Professionals choose the options available to you in your plan, making your decisions easier.
  1. Put-Call Parity

    A principle that defines the relationship between the price of ...
  2. Credit Default Swap - CDS

    A particular type of swap designed to transfer the credit exposure ...
  3. Maturity

    The period of time for which a financial instrument remains outstanding. ...
  4. Employee Stock Option - ESO

    A stock option granted to specified employees of a company. ESOs ...
  5. Deficit

    The amount by which a resource falls short of a mark, most often ...
  6. Implied Volatility - IV

    The estimated volatility of a security's price.

You May Also Like

Hot Definitions
  1. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  2. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  3. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  4. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  5. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  6. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!