The Looming End of LIBOR
LIBOR is the average interest rate based on estimates from the leading banks in London of what rate each would expect to pay were it to borrow from other banks. It was developed in the 1980s by the British Bankers Association as a tool to promote uniformity in interest rate swap markets, but it has spread to a staggering array of transaction types and volumes, functioning today as a primary benchmark for short-term interest rates around the world. It is estimated that more than $350 trillion in derivatives and other financial products are tied to LIBOR. As interest rate indices go, it has been phenomenally successful.