# Reference rate

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{{Short description|Benchmark interest rate used to price loans and financial contracts}}
A '''reference rate''' is a rate that determines pay-offs in a financial contract and that is outside the control of the parties to the contract. It is often some form of [LIBOR](/source/LIBOR) rate, but it can take many forms, such as a [consumer price index](/source/consumer_price_index), a house price index or an [unemployment rate](/source/unemployment_rate).  Parties to the contract choose a reference rate that neither party has power to manipulate.

==Examples of use==
The most common use of reference rates is that of short-term interest rates such as LIBOR in [floating rate note](/source/floating_rate_note)s,  [loan](/source/loan)s, [swaps](/source/swap_(finance)), short-term interest rate [futures contract](/source/futures_contract)s, etc. The rates are calculated by an independent organisation, such as the [British Bankers Association](/source/British_Bankers_Association) (BBA) as the average of the rates quoted by a large panel of banks, to ensure independence.

Another example is that of swap reference rates for [constant maturity swap](/source/constant_maturity_swap)s. The [ISDAfix](/source/ISDAfix) rates used are calculated daily for an independent organisation, the [International Swaps and Derivatives Association](/source/International_Swaps_and_Derivatives_Association), from quotes from a large panel of banks.

In the [credit derivative](/source/credit_derivative) market a similar concept to reference rates is used. Pay offs are not determined by a ''rate'', but by possible ''events''. In this case, the ''reference event'' has to be a very precisely defined [credit event](/source/credit_event), to make sure there can be no disagreement on whether the event has occurred or not..

Typically the benchmark LIBOR is the three-month rate.

==Reference rates for short-term interest rates==
Examples of reference rates for short-term interest rates are:
* [LIBOR](/source/LIBOR) - London Interbank Offered Rate. LIBOR was terminated in June 2023.<ref>[https://www.theice.com/iba/libor ICE LIBOR]</ref>
* [SOFR](/source/SOFR) - Secured Overnight Financing Rate. SOFR is a reference rate established as an alternative to LIBOR.
* [Euribor](/source/Euribor) - Euro Interbank Offered Rate
* [EONIA](/source/EONIA) - Euro OverNight Index Average. EONIA was replaced by the [Euro short-term rate](/source/Euro_short-term_rate) (€STR) in 2019.
* [€STR](/source/%E2%82%ACSTR) - Euro short-term rate
* [TIBOR](/source/TIBOR) - Tokyo Interbank Offered Rate. [Euroyen](/source/Euroyen) TIBOR will be terminated in 2024.<ref>[https://www.jbatibor.or.jp/english/reform/ JBA TIBOR Reform | JBA TIBOR]</ref>
* [TONAR](/source/TONAR) - Tokyo Overnight Average Rate
* [SIBOR](/source/SIBOR) - Singapore Interbank Offered Rate
* [STIBOR](/source/STIBOR) - Stockholm Interbank Offered Rate
* [WIBOR](/source/WIBOR) - Warsaw Interbank Offered Rate
* [MIBOR](/source/MIBOR_(Indian_reference_rate)) - Mumbai Interbank Offered Rate
* [PRIBOR](/source/PRIBOR) - Prague Interbank Offered Rate
* [BUBOR](/source/BUBOR) - Budapest Interbank Offered Rate
* [HIBOR](/source/HIBOR) - Hong Kong Interbank Offered Rate
* [SHIBOR](/source/SHIBOR) - Shanghai Interbank Offered Rate
* [ISDAfix](/source/ISDAfix) - International Swap Dealers Association Fix
* [TELBOR](/source/TELBOR) - Tel Aviv Interbank Offered Rate

== References ==
{{reflist}}

{{reference rates}}

Category:Reference rates
Category:Interest rates

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Adapted from the Wikipedia article [Reference rate](https://en.wikipedia.org/wiki/Reference_rate) by Wikipedia contributors ([contributor history](https://en.wikipedia.org/wiki/Reference_rate?action=history)). Available under [Creative Commons Attribution-ShareAlike 4.0 International](https://creativecommons.org/licenses/by-sa/4.0/). Changes may have been made.