Reference rate

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Reference rate

A benchmark interest rate (such as LIBOR) used to specify conditions of an interest rate swap or an interest rate agreement.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Reference Rate

A floating interest rate or other benchmark used in some investment vehicles. For example, in an interest rate swap, the reference rate is the floating interest rate that one of the counterparties is paid. Likewise, in an adjustable-rate mortgage, the reference rate is the floating interest rate that helps determine the interest rate the property owner pays. Usually, the reference rate is LIBOR or some other interest rate that is adjusted on a daily basis.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
Christina regularly advises clients regarding the proposed cessation of the London Interbank Offering Rate (LIBOR) and the transition of existing LIBOR-based contracts to new reference rates such as the Secured Overnight Financing Rate (SOFR).
TrueDigital has also created the first-of-its-kind margined deliverable swap contracts on Bitcoin as well as the first institutional OTC-based digital asset reference rates.
THE UK's financial watchdog has cast doubt over the future of Libor and urged banks to shift towards alternative reference rates within the next four to five years.
According to an RBI statement, the exchange rates for the pound and the yen against the rupee were quoted at 88.54 and 63.38 per 100 yens, respectively, based on reference rates for the dollar and cross-currency quotes at noon.
Moves towards the central clearing of derivatives reduce the economic relevance of reference rates. Further, CFTC Chairman Gary Gensler has noted that the interbank market itself has changed dramatically since the 1980s when LIBOR was first popularised.
Reference rates and the default adjustment method will differ from those used for commercial banks, as will details on how total implicit services are apportioned among sectors of the economy.
In response to the Libor scandal that rocked the banking world last year, the world's most powerful central bankers called for prompt action on Monday to replace the tarnished Libor interest rate benchmark with a range of reliable and robust reference rates.
It has been estimated that in excess of $300 trillion in contracts and loans around the world are linked to LIBOR reference rates.
The banking company has already withdrawn from setting such reference rates in Asia.
The scandal deals a serious blow to the City's image and undermines confidence in these reference rates. There has been a growing clamour for an overhaul of the rate setting and closer surveillance of the process to avoid such manipulation.
The proposal envisions banks using a common basis for their interest rates, whether the euro zone's Euribor or the local Sofibor interbank interest reference rates, Finance Minister Simeon Dyankov said on February 10.