A reference rate is a rate that determines pay-offs in a financial contract and that is outside the control of the parties to the contract. It is often some form of LIBOR rate, but it can take many forms, such as a consumer price index , a house price index or an unemployment rate . Parties to the contract choose a reference rate that neither party has power to manipulate.
4-460: The Shanghai Interbank Offered Rate (or Shibor , 上海银行间同业拆放利率) is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the Shanghai wholesale (or "interbank") money market . There are eight Shibor rates, with maturities ranging from overnight to a year. They are calculated from rates quoted by 18 banks, eliminating the four highest and
8-439: A similar concept to reference rates is used. Pay offs are not determined by a rate , but by possible events . In this case, the reference event has to be a very precisely defined credit event , to make sure there can be no disagreement on whether the event has occurred or not.. Typically the benchmark LIBOR is the three-month rate. Examples of reference rates for short-term interest rates are: This finance-related article
12-547: The British Bankers Association (BBA) as the average of the rates quoted by a large panel of banks, to ensure independence. Another example is that of swap reference rates for constant maturity swaps . The ISDAfix rates used are calculated daily for an independent organisation, the International Swaps and Derivatives Association , from quotes from a large panel of banks. In the credit derivative market
16-439: The four lowest rates, and then averaging the remaining 10. This bank and insurance -related article is a stub . You can help Misplaced Pages by expanding it . Reference rate The most common use of reference rates is that of short-term interest rates such as LIBOR in floating rate notes , loans , swaps , short-term interest rate futures contracts , etc. The rates are calculated by an independent organisation, such as
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