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In finance, an interest rate swap (IRS) is an interest rate derivative (IRD). It involves exchange of interest rates between two parties. In particular it is a "linear" IRD and one of the most liquid, benchmark products. It has associations with forward rate agreements (FRAs), and with zero coupon swaps (ZCSs).
The London Inter-Bank Offered Rate is an interest rate average calculated from estimates submitted by the leading banks in London. Each bank estimates what it would be charged were it to borrow from other banks. It is the primary benchmark, along with the Euribor, for short-term interest rates around the world. Libor was phased out at the end of 2021, and market participants are being encouraged to transition to risk-free interest rates such as SOFR and SARON.
In finance, a forward rate agreement (FRA) is an interest rate derivative (IRD). In particular it is a linear IRD with strong associations with interest rate swaps (IRSs).
The Euro Interbank Offered Rate (Euribor) is a daily reference rate, published by the European Money Markets Institute, based on the averaged interest rates at which Eurozone banks borrow unsecured funds from counterparties in the euro wholesale money market. Prior to 2015, the rate was published by the European Banking Federation.
Eonia was computed as a weighted average of all overnight unsecured lending transactions in the interbank market, undertaken in the European Union and European Free Trade Association (EFTA) countries by a Panel of banks subject to the Eonia Code of Conduct.
SIBOR stands for Singapore Interbank Offered Rate and is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the Singapore wholesale money market. It is similar to the widely used LIBOR, and Euribor. Using SIBOR is more common in the Asian region and set by the Association of Banks in Singapore (ABS).
An interest rate future is a financial derivative with an interest-bearing instrument as the underlying asset. It is a particular type of interest rate derivative.
TIBOR stands for the Tokyo Interbank Offered Rate and is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the Japan wholesale money market. TIBOR is published daily by the JBA TIBOR Administration.
The Asian Clearing Union (ACU) was established on December 9, 1974, at the initiative of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP). The primary objective of ACU, at the time of its establishment, was to secure regional co-operation regarding the clearing of eligible monetary transactions among the members of the Union to provide a system for clearing payments among the member countries on a multilateral basis.
The TED spread is the difference between the interest rates on interbank loans and on short-term U.S. government debt ("T-bills"). TED is an acronym formed from T-Bill and ED, the ticker symbol for the Eurodollar futures contract.
The overnight rate is generally the interest rate that large banks use to borrow and lend from one another in the overnight market. In some countries, the overnight rate may be the rate targeted by the central bank to influence monetary policy. In most countries, the central bank is also a participant on the overnight lending market, and will lend or borrow money to some group of banks.
An overnight indexed swap (OIS) is an interest rate swap (IRS) over some given term, e.g. 10Y, where the periodic fixed payments are tied to a given fixed rate while the periodic floating payments are tied to a floating rate calculated from a daily compounded overnight rate over the floating coupon period. Note that the OIS term is not overnight; it is the underlying reference rate that is an overnight rate. The exact compounding formula depends on the type of such overnight rate.
The interbank lending market is a market in which banks lend funds to one another for a specified term. Most interbank loans are for maturities of one week or less, the majority being overnight. Such loans are made at the interbank rate. A sharp decline in transaction volume in this market was a major contributing factor to the collapse of several financial institutions during the financial crisis of 2007–2008.
The development of the money market in the euro area or the euro money market made its inception with very low rates of interest.
SARON stands for Swiss Average Rate Overnight and is a measurement of the overnight interest rate of the secured funding market denominated in Swiss Franc (CHF). It is based on transactions and quotes posted in the Swiss repo market, and is administered by SIX.
Secured Overnight Financing Rate (SOFR) is a secured overnight interest rate. SOFR is a reference rate established as an alternative to LIBOR. LIBOR had been published in a number of currencies and underpins financial contracts all over the world. Deeming it prone to manipulation, UK regulators decided to discontinue LIBOR in 2021.
Tokyo Overnight Average Rate or Japanese Yen Uncollateralized Overnight Call Rate is an unsecured interbank overnight interest rate and reference rate for Japanese yen. Mutan rate and TONA rate are the same things.
The Euro Short-Term Rate (€STR) is a reference rate for the euro currency. This interest rate can be used as the rate referenced in financial contracts that involve the euro. €STR is administered and calculated by the European Central Bank (ECB), based on the money market statistical reporting of the Eurosystem. According to the indications of the working group on euro risk-free rates, €STR replaced the Euro Overnight Index Average (EONIA) as the Euro risk-free rate for all products and contracts.
SOFR Academy, Inc. is a U.S.-based economic education and market information provider. In connection with global reference rate reform and the transition away from the London Interbank Offered Rate (LIBOR), the firm operationalized benchmark credit spreads US-dollar Across-the-curve credit spread indices (AXI) that can be referenced in lending products in conjunction with the Secured Overnight Financing Rate (SOFR) to mitigate mismatches for financial institutions between their assets and liabilities in times of market stress thereby promoting their ability to provide credit.
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