What is LIBOR, how are LIBOR interest rates determined, and for what a

What is LIBOR, how are LIBOR interest rates determined, and for what are they used?

What will be an ideal response?

ANSWER

LIBOR is the London Interbank Offered Rate and is a series of short-term interest rates estimated daily in London by a group of large international banks. Unfortunately, the LIBOR rates (currently estimated for 10 currencies and 15 relatively short maturities) are simply estimates of rates at which these banks could borrow or lend and are not actual rates. Thus, they are subject to manipulation and fraud. This is particularly important because these rates are used to set adjustable rates for items such as mortgages, consumer, and municipal loans. Some estimates put the affected value impacted by LIBOR in excess of $800 trillion. In recent years larger banks have been fined heavily for alleged manipulation of the LIBOR market.