The BBA quote LIBOR (London Interbank Offer Rates) rates on their website on a daily basis. The rates they quote are for different periods e.g. Overnight, 1 month,
3 month, 12 months etc.Does anybody know whether these rates refer to the effective or nominal rates of interest?
That is, if the 1 month interbank rate is 5% does that mean that a bank entering into a deal for one month LIBOR would receive their interest on that deal after 1 month, and hence benefit from the compounding effect of that receipt?
Or do the rates mean that banks enter into 12 months contracts where they agree to refix the rate after every month and interest would only be paid after 12 months?
Any help much appreciated,
Best wishes,
Phil