LIBOR has a particular significance in relation to IG's platform. Here, we define LIBOR in general investing and explain what it means to you when trading with IG.
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LIBOR, or the London Interbank Offered Rate, is a benchmark that dictates daily interest rates on loans and financial instruments around the world.
To calculate LIBOR, the Intercontinental Exchange (ICE) asks banks around the world to provide the rates at which they would offer a short-term loan to each other. It then averages each response to give the daily LIBOR figure.
LIBOR is calculated in five different currencies – the US dollar, euro, British pound, Japanese yen and Swiss franc – and seven different lengths of loan. That means that there are actually 35 different LIBOR numbers posted each day.
Financial companies around the world then use the LIBOR figure to calculate their own interest rates on loans, mortgages, credit cards and financial derivative prices.
IG uses LIBOR to dictate daily funding costs for cash CFDs. Charges are a certain percentage above or below the current LIBOR rate, depending on whether the position is long or short.