ING explains LIBOR
LIBOR (London Interbank Offered Rate) is the interest rate at which banks can borrow funds from one another on an unsecured basis.
The British Bankers' Association derives this benchmark daily from an average of interbank deposit rates for large loans offered by the world’s most creditworthy banks.
A LIBOR benchmark is produced for 15 different maturities — ranging from overnight to 12 months — with each denominated in ten different currencies — U.S. dollar, British sterling, euro and Japanese yen being the most prominent.
In addition to loans, LIBOR is commonly used as a reference rate for a variety of financial instruments, including certain types of futures, options and swaps.