LIBOR (London Interbank Offered Rate)

The London Interbank Offered Rate (LIBOR) is an average interest rate at which major global banks lend money to one another. It is calculated daily based on the rates submitted by these banks for different borrowing periods. LIBOR is important because it serves as a benchmark for a wide range of financial products, including loans, mortgages, and derivatives. It reflects the cost of borrowing and influences borrowing costs for consumers and businesses worldwide. Recently, concerns about its reliability led to its phased replacement by alternative reference rates, like the Secured Overnight Financing Rate (SOFR).