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The OIS is a swap derived from the overnight rate, which is generally fixed by the local central bank. The OIS allows LIBOR-based banks to borrow at a fixed rate of interest over the same period. In the United States, the spread is based on the LIBOR Eurodollar rate and the Federal Reserve's Fed Funds rate. [2]
The London Interbank Offered Rate (LIBOR) came into widespread use in the 1970s as a reference interest rate for transactions in offshore Eurodollar markets. [25] [26] [27] In 1984, it became apparent that an increasing number of banks were trading actively in a variety of relatively new market instruments, notably interest rate swaps, foreign currency options and forward rate agreements.
The US LIBOR-OIS spread ballooned to over 90bps in September whereas it had averaged 10bps in prior months. At the following FOMC meeting (September 18, 2007), the Fed started to ease monetary policy aggressively in response to the turmoil in financial markets.
The STLFSI was first published in early 2010, with data going back to 1993, ... (3-month LIBOR-OIS spread); the 3-month Treasury-Eurodollar spread ...
The time before that, the global financial system was slowly coming back from the brink of collapse. This time, there is no evidence that the rapid widening of the so-called Libor-OIS spread ...
The TED spread is an indicator of perceived credit risk in the general economy, [2] since T-bills are considered risk-free while LIBOR reflects the credit risk of lending to commercial banks. An increase in the TED spread is a sign that lenders believe the risk of default on interbank loans (also known as counterparty risk) is increasing ...
The LIBOR market model, also known as the BGM Model (Brace Gatarek Musiela Model, in reference to the names of some of the inventors) is a financial model of interest rates. [1]
The London Interbank Bid Rate (LIBID) is a bid rate; the rate bid by banks on Eurocurrency deposits (i.e., the rate at which a bank is willing to borrow from other banks). It is the "other end" of the LIBOR (an offered, hence "ask" rate, the rate at which a bank will lend).