Chapter 5

Eurocurrency Markets and the LIBOR

Abstract

The international deposit and loan market in a nondomestic currency is called the Eurocurrency market, and banks that accept these deposits and make loans are often called Eurobanks. This chapter describes the major points and issues of the Eurocurrency market, providing some pertinent history as well. The reasons for and benefits of offshore banking are discussed. LIBOR, the London Interbank Offered Rate, is covered in detail, because of its use in determining variable interest rates and cost of swaps around the world. Much attention is paid in the chapter to interest rate spreads and risk, with practical examples provided. Also discussed in detail are international banking facilities and offshore ...

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