| London Inter Bank
Offering Rate (LIBOR) is an average of the interest rate on
dollar-denominated deposits, also known as Eurodollars, traded
between banks in London. The Eurodollar market is a major component
of the International financial market. London is the center of the
Euromarket in terms of volume.
The LIBOR is an international index
which follows the world economic condition. It allows international
investors to match their cost of lending to their cost of funds. The
LIBOR compares most closely to the 1-Year CMT
index and is more open to quick and wide fluctuations than the
COFI rate, as shown on our graph.
There are several different LIBOR
rates widely used as ARM indexes: 1-, 3-, 6-Month, and 1-Year LIBOR.
The 6-Month LIBOR is the most common.
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