The LIBOR benchmark and what replaced it
Question
What is LIBOR, and where does that benchmark rate stand today?
Short answer
Explain the benchmark and its retirement. LIBOR was a daily average of rates at which panel banks said they could borrow unsecured from each other, published for several currencies and tenors and used to set rates on swaps, loans and floating-rate notes. After manipulation scandals it was phased out by 2023 in favour of transaction-based rates such as SOFR and SONIA, so be ready to quote those.
Adapted from Crack, Heard on the Street, Q5.3.8, p.51; question and answer rewritten by SelfMadeQuant.com.
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