What is LIBOR?
by Girl Banker
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Libor is a very important concept if you want to work in the capital markets. You could easily be asked to define LIBOR in an interview.
What is LIBOR or Libor?
LIBOR is the London Inter-Bank Offered Rate. It is the rate of interest that banks charge to lend money to each other, i.e. it is an interbank interest rate.
If a LIBOR rate is needed for an intermediate point, simple linear interpolation is normally used.
If LIBOR rates are plotted on a graph with time on the x-axis, the result is a LIBOR curve. The LIBOR curve is a type of yield curve, that is, a curve showing interest rates against time.
Historical LIBOR levels are freely available from the BBA website.
In the week of Jun 24th 2012 news broke that some banks had been manipulating LIBOR rates in order to look more secure during the financial crisis (dates range from as early as 2005 to 2009). Barclays was notably fined £290m ($450m) for its involvement in rate fixing.
I created my investment banking blog in 2012 as soon as I resigned from i-banking & published my book, To Become An Investment Banker.
Initially published at girlbanker.com, all posts have now been subsumed into my personal website under katsonga.com/GirlBanker.
These blog posts make it as straight-forward for you as possible to get into a top tier investment bank.
I have 7 years of front office i-banking experience from Goldman Sachs and HSBC, in both classic IBD (corporate finance) and Derivatives (DCM / FICC).
I'm also a CFA survivor having passed all three levels on the first attempt within 18 months - the shortest time possible.