Interest Rates Chapter 9

Banker's Acceptance

A postdated check on which a bank has guaranteed payment. Commonly used to finance international trade transactions.

London Interbank Offered Rate (LIBOR)

Interest rate that international banks charge one another for overnight Eurodollar loans. These are banks based in london (European banks and US banks based in london)) and they are trading euro dollars (US dollars held in foreign banks)- these are essentially dollar loans. So these are dollar loans traded at super duper credit worthy banks at overnight rates. This has become a super important rate for US economy

Prime Rate

The basic interest rate on short-term loans that the largest commercial banks charge to their most creditworthy corporate customers.

Call Money Rate

The interest rate brokerage firms pay for call money loans from banks. This rate is used as the basis for customer rates on margin loans.

CDs

The interest rate on certificates of deposit, which are large-denomination deposits of $100,000 or more at commercial banks

discount rate

The interest rate that the Fed offers to commercial banks for overnight reserve loans.

Eurodollars

U.S. dollar denominated deposits in banks outside the U.S. this is what LIBRO trades

EURIBRO

an interest rate that also refers to deposits denominated in euros. However EURIBRO is based largely on interest rates from the interbank market for banks in the European union.

HIBRO

is an interest rate based on hong kong dollars. Hibro is the interest rate among banks in the Hong Kong interbank market

Euro LIBOR

refers to deposits denominated in euros—the common currency of 19 European Union countries.

US Treasury Bills

short-term marketable IOUs issued by the U.S. federal government

commercial paper

short-term unsecured debt issued by large corporations

Federal Funds Rate

the interest rate banks charge each other for overnight loans of $1 million or more