London Interbank Offered Rate (LIBOR)

The London Interbank Offered Rate (LIBOR) is the average interest rate at which major global banks lend money to each other in the short term. It serves as a key benchmark for setting interest rates on various financial products, such as loans and mortgages. LIBOR is calculated daily based on submissions from banks and reflects the creditworthiness of banks, market conditions, and currency risks. Although widely used for decades, LIBOR is being phased out and replaced by other benchmarks due to past manipulation scandals and changes in the financial landscape.