The London Interbank Offered Rate, or LIBOR, is a sort of referential point to monitor the liquid and active interest rate markets. It can be compared to the U.S. Federal funds rate. The LIBOR is an indicator that is based on the rates of interest at which banks have access to unsecured funds from the other banks in the Interbank market. The Interbank market is also known as the London wholesale money market.
LIBOR is used as a reference point for a variety of financial tools like
• forward rate agreements
• short-term interest rate contracts
• inflation swaps
• interest rate swaps
• floating rate notes
• syndicated loans
• variable rate mortgages
• Currencies and especially the US dollar