- Federal Funds Rate
Bank lending Fed funds to other banks
- Prime Rate
Bank lending money to its customers
- Repo/Discount Rate
Fed lending its own money to banks
See: Discount Window
- LIBOR (London Interbank Offered Rate)
Bank lending money to other banks
- OIS (Overnight Indexed Swap)
Banks paying/receiving floating/fixed with other banks
Note: The swap rate is usually in between LIBOR and the Fed funds rate
See: OIS
- Eurodollar
Banks lending USD outside US
What does the LIBOR-OIS spread tell us?
Both LIBOR and OIS are between two risky counterparties, but OIS is less risky (because of swap payment and nominal amount netting). Hence the LIBOR-OIS spread is a measure of banks' credit risks.
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