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<title>Reference rate</title>

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<span id="openzim-page-title" class="mw-page-title-main"><span class="mw-page-title-main">Reference rate</span></span>

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<div id="mw-content-text" class="mw-body-content mw-content-ltr" lang="en" dir="ltr"><div class="mw-content-ltr mw-parser-output" lang="en" dir="ltr"><p>A <b>reference rate</b> is a rate that determines pay-offs in a financial contract and that is outside the control of the parties to the contract. It is often some form of <a href="LIBOR" class="mw-redirect" title="LIBOR">LIBOR</a> rate, but it can take many forms, such as a <a href="Consumer_price_index" title="Consumer price index">consumer price index</a>, a house price index or an <a href="Unemployment_rate" class="mw-redirect" title="Unemployment rate">unemployment rate</a>. Parties to the contract choose a reference rate that neither party has power to manipulate.

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<div class="mw-heading mw-heading2"><h2 id="Examples_of_use">Examples of use</h2></div>

<p>The most common use of reference rates is that of short-term interest rates such as LIBOR in <a href="Floating_rate_note" title="Floating rate note">floating rate notes</a>, <a href="Loan" title="Loan">loans</a>, <a href="Swap_(finance)" title="Swap (finance)">swaps</a>, short-term interest rate <a href="Futures_contract" title="Futures contract">futures contracts</a>, etc. The rates are calculated by an independent organisation, such as the <a href="British_Bankers_Association" class="mw-redirect" title="British Bankers Association">British Bankers Association</a> (BBA) as the average of the rates quoted by a large panel of banks, to ensure independence.

</p><p>Another example is that of swap reference rates for <a href="Constant_maturity_swap" title="Constant maturity swap">constant maturity swaps</a>. The <a href="ISDAfix" title="ISDAfix">ISDAfix</a> rates used are calculated daily for an independent organisation, the <a href="International_Swaps_and_Derivatives_Association" title="International Swaps and Derivatives Association">International Swaps and Derivatives Association</a>, from quotes from a large panel of banks.

</p><p>In the <a href="Credit_derivative" title="Credit derivative">credit derivative</a> market a similar concept to reference rates is used. Pay offs are not determined by a <i>rate</i>, but by possible <i>events</i>. In this case, the <i>reference event</i> has to be a very precisely defined <a href="Credit_event" title="Credit event">credit event</a>, to make sure there can be no disagreement on whether the event has occurred or not..

</p><p>Typically the benchmark LIBOR is the three-month rate.

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<div class="mw-heading mw-heading2"><h2 id="Reference_rates_for_short-term_interest_rates">Reference rates for short-term interest rates</h2></div>

<p>Examples of reference rates for short-term interest rates are:

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<ul><li><a href="LIBOR" class="mw-redirect" title="LIBOR">LIBOR</a> - London Interbank Offered Rate. LIBOR was terminated in June 2023.<sup id="cite_ref-1" class="reference"><a href="#cite_note-1"><span class="cite-bracket">[</span>1<span class="cite-bracket">]</span></a></sup></li>

<li><a href="SOFR" title="SOFR">SOFR</a> - Secured Overnight Financing Rate. SOFR is a reference rate established as an alternative to LIBOR.</li>

<li><a href="Euribor" title="Euribor">Euribor</a> - Euro Interbank Offered Rate</li>

<li><a href="EONIA" class="mw-redirect" title="EONIA">EONIA</a> - Euro OverNight Index Average. EONIA was replaced by the <a href="Euro_short-term_rate" class="mw-redirect" title="Euro short-term rate">Euro short-term rate</a> (€STR) in 2019.</li>

<li><a href="%E2%82%ACSTR" title="€STR">€STR</a> - Euro short-term rate</li>

<li><a href="TIBOR" title="TIBOR">TIBOR</a> - Tokyo Interbank Offered Rate. <a href="Euroyen" class="mw-redirect" title="Euroyen">Euroyen</a> TIBOR will be terminated in 2024.<sup id="cite_ref-2" class="reference"><a href="#cite_note-2"><span class="cite-bracket">[</span>2<span class="cite-bracket">]</span></a></sup></li>

<li><a href="TONAR" title="TONAR">TONAR</a> - Tokyo Overnight Average Rate</li>

<li><a href="SIBOR" title="SIBOR">SIBOR</a> - Singapore Interbank Offered Rate</li>

<li><a href="STIBOR" class="mw-redirect" title="STIBOR">STIBOR</a> - Stockholm Interbank Offered Rate</li>

<li>WIBOR - Warsaw Interbank Offered Rate</li>

<li><a href="MIBOR_(Mumbai_Inter-Bank_Offer_Rate)" class="mw-redirect" title="MIBOR (Mumbai Inter-Bank Offer Rate)">MIBOR</a> - Mumbai Interbank Offered Rate</li>

<li>PRIBOR - Prague Interbank Offered Rate</li>

<li>BUBOR - Budapest Interbank Offered Rate</li>

<li><a href="HIBOR" title="HIBOR">HIBOR</a> - Hong Kong Interbank Offered Rate</li>

<li><a href="SHIBOR" class="mw-redirect" title="SHIBOR">SHIBOR</a> - Shanghai Interbank Offered Rate</li>

<li><a href="ISDAfix" title="ISDAfix">ISDAfix</a> - International Swap Dealers Association Fix</li>

<li>TELBOR - Tel Aviv Interbank Offered Rate</li></ul>

<div class="mw-heading mw-heading2"><h2 id="References">References</h2></div>

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<li id="cite_note-1"><span class="mw-cite-backlink"><b><a href="#cite_ref-1">^</a></b></span> <span class="reference-text"><a rel="nofollow" class="external text" href="https://www.theice.com/iba/libor">ICE LIBOR</a></span>

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<li id="cite_note-2"><span class="mw-cite-backlink"><b><a href="#cite_ref-2">^</a></b></span> <span class="reference-text"><a rel="nofollow" class="external text" href="https://www.jbatibor.or.jp/english/reform/">JBA TIBOR Reform | JBA TIBOR</a></span>

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</style><div id="Reference_rates35" style="font-size:114%;margin:0 4em"></div></th></tr><tr><th scope="row" class="navbox-group" style="width:1%">Terminology</th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em">

<li><a href="Effective_interest_rate" title="Effective interest rate">Effective interest rate</a></li>

<li><a href="Interbank_lending_market" title="Interbank lending market">Interbank lending market</a></li>

<li><a href="Overnight_indexed_swap" title="Overnight indexed swap">Overnight indexed swap</a></li>

<li><a href="Overnight_rate" title="Overnight rate">Overnight rate</a></li></ul>

</div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%">Rates</th><td class="navbox-list-with-group navbox-list navbox-even" style="width:100%;padding:0"><div style="padding:0 0.25em">

<ul><li><a href="EIBOR" title="EIBOR">EIBOR</a></li>

<li><a href="Euribor" title="Euribor">Euribor</a></li>

<li><a href="EONIA" class="mw-redirect" title="EONIA">EONIA</a></li>

<li><a href="EURONIA" title="EURONIA">EURONIA</a></li>

<li><a href="Federal_funds_rate" title="Federal funds rate">Federal funds rate</a></li>

<li><a href="Helibor" title="Helibor">Helibor</a></li>

<li><a href="HIBOR" title="HIBOR">HIBOR</a></li>

<li><a href="Johannesburg_Interbank_Average_Rate" title="Johannesburg Interbank Average Rate">JIBAR</a></li>

<li><a href="KIBOR" title="KIBOR">Pakistani KIBOR</a></li>

<li><a href="Kyiv_Interbank_Offer_Rate" title="Kyiv Interbank Offer Rate">Ukrainian KIBOR</a></li>

<li><a href="Libor" title="Libor">Libor</a></li>

<li><a href="MIBOR_(Indian_reference_rate)" title="MIBOR (Indian reference rate)">Indian MIBOR</a></li>

<li><a href="MIBOR_(Russian_reference_rate)" class="mw-redirect" title="MIBOR (Russian reference rate)">Russian MIBOR</a></li>

<li><a href="RIGIBOR" title="RIGIBOR">RIGIBOR</a></li>

<li><a href="SAIBOR" title="SAIBOR">SAIBOR</a></li>

<li><a href="SARON" title="SARON">SARON</a></li>

<li><a href="Shibor" title="Shibor">Shibor</a></li>

<li><a href="SIBOR" title="SIBOR">Singaporean SIBOR</a></li>

<li><a href="SONIA_(interest_rate)" title="SONIA (interest rate)">SONIA</a></li>

<li><a href="Stockholm_Interbank_Offered_Rate" title="Stockholm Interbank Offered Rate">STIBOR</a></li>

<li><a href="TED_spread" title="TED spread">TED spread</a></li>

<li><a href="TIBOR" title="TIBOR">TIBOR</a></li>

<li><a href="TONAR" title="TONAR">TONAR</a>

<ul><li><a href="Mutan_rate" title="Mutan rate">Mutan rate</a></li></ul></li></ul>

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