LIBOR Defined

Generali

http://anothereconomicblog.blogspot.com/2010/05/what-is-libor.html

What next?

Thrugelmir

A useful post.

As many have no comprehension as to how LIBOR is arrived at.

Really2

Generali wrote: »

http://anothereconomicblog.blogspot.com/2010/05/what-is-libor.html

What next?

Differences between an African and European swallow.

Generali

Really2 wrote: »

Differences between an African and European swallow.

Summer and winter isn't it...?:D

purch

What next?

The Meaning of Life ??

Generali

purch wrote: »

The Meaning of Life ??

http://www.youtube.com/watch?v=dvwH8Qij0JY

...And pray there's intelligent life somewhere up in space because there's beggur all down here on Earth

michaels

Might be worth adding that at times of financial strain the quoted libor and borrowing rate for AAA rated banks have been known to diverge widely (in either direction) based on the perceived security of the bank in question.

I also think the libor ois spread which in effect disaggregates libor in to an interest rate expectation component and a risk premium component is worth a mention as otherwise an increase in libor could be misinterpreted as an increase in the risk premium whereas it actually relates to an increased expectation of a change in base rate.

tomterm8

Generali wrote: »

http://anothereconomicblog.blogspot.com/2010/05/what-is-libor.html

What next?

Explaining how come we can agree that:

(a) Markets are efficient and
(b) They sometimes drop 1,000 points in a couple of minutes, even though everyone seems to think theres new news.

purch

To calculate LIBOR, between 8 and 16 banks are asked to input the answer to the following question into a Reuters terminal (a secure information and messaging service):

It's never been the same since the 'nice lady' from the BBA stopped phoning around the Banks for their LIBOR's

You could just make them up in those days off the top of your head.....now it's all technological and the personal touch is gone.

P.S. Purch is nearly 50, and starting to feel old :eek:

Generali

tomterm8 wrote: »

Explaining how come we can agree that:

(a) Markets are efficient and
(b) They sometimes drop 1,000 points in a couple of minutes, even though everyone seems to think theres new news.

Well FWIW my opinion is that markets aren't 100% efficient but they are the best way in most cases to allocate scarce resources, goods and services.

IMO, swings in asset price markets in the short term are utterly irrelevent unless they make people insolvent.

purch

Explaining how come we can agree that:

(a) Markets are efficient and
(b) They sometimes drop 1,000 points in a couple of minutes, even though everyone seems to think theres new news

Personally, I've always considered the markets to be efficient over the medium to long term, and spectacularly inefficient over the shorter term.

Usually the market discounts all the news, except for the news that it's forgotten about (and the market recently appears to be contracting Alzheimers at a disconcerting speed)