LIBOR Flat

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DEFINITION of 'LIBOR Flat'

An interest rate benchmark used to establish the floating interest rate that is paid on the notional principal in an interest-rate swap. LIBOR flat has no spread added to it and represents the best interest rate available in the current market. It is the most common reference on which other interest rates are based.

BREAKING DOWN 'LIBOR Flat'

LIBOR is the London Interbank Offered Rate, an interest rate at which banks can borrow money from each other. The rate changes daily. Often, a spread is added to LIBOR. This is an additional percentage of interest that reflects the risk of lending to a particular borrower. LIBOR flat has no spread added to it and represents the best interest rate available in the current market. It is the most common reference on which other interest rates are based.

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RELATED FAQS
  1. What is the difference between LIBOR, LIBID and LIMEAN?

    LIBOR, LIBID and LIMEAN are all reference rates used to benchmark short-term interest rates. The London Interbank Offered ... Read Full Answer >>
  2. What are the main risks associated with trading derivatives?

    The primary risks associated with trading derivatives are market, counterparty, liquidity and interconnection risks. Derivatives ... Read Full Answer >>
  3. Should you calculate Value at Risk (VaR) for counterparty credit risk?

    Value at risk (VaR) calculations may be helpful for risk management when trading credit default swaps and other derivatives ... Read Full Answer >>
  4. For what financial instruments is a modified duration relevant?

    The modified duration is a formula used to calculate the percent change in the price of a financial instrument when there ... Read Full Answer >>
  5. What is the difference between derivatives and swaps?

    Derivatives are securities with prices dependent on one or multiple underlying assets. Common derivatives include forward ... Read Full Answer >>
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    Tenor – the amount of time left on a debt security's maturity – is important in a credit default swap because it coordinates ... Read Full Answer >>

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