Reference [interest] rate, benchmark [interest] rate

Generally, an interest rate to which a large number of transactions refer, such as LIBOR. Such a benchmark must fulfill various conditions, such as above all: – Transparency: the procedure for determining the interest rate must be sufficiently open and transparent, – Reliability: the interest rate should be immune to unfair influence of any kind, i.e. secured against market manipulation, – Representativeness: the interest rate must be relevant and meaningful for the market to be measured, i.e. it must accurately reflect market activity, – Usability: the interest rate should be available on a daily basis, easy to calculate and free of high volatility. – Interest rate on which both parties agree in principle in the case of a loan. In many contracts, however, a periodic adjustment of this interest rate is agreed, based on a specific rate, such as EURIBOR. This ensures that the interest rate is in line with the market. – See long-term culture, rollover credit, TIBOR, interest rate change, fixed interest rate, interest rate swap. – Cf. ECB Monthly Bulletin, October 2013, pp. 77 et seq. (very detailed presentation of the nature and significance of reference interest rates; overviews; references), BaFin Annual Report 2013, p. 79 (supervisory measures to monitor reference interest rates).

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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