What is the difference between LIBOR, LIBID and LIMEAN?

By Investopedia Staff AAA
A:

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

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