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London Interbank Bid Rate

London Interbank Bid Rate is a science topic covered in the lgStudy science library. This page brings together a partial reference excerpt, illustrations, worked examples, real-world applications and a short study plan, so you can understand London Interbank Bid Rate rather than just read about it. In short: The London Interbank Bid Rate (LIBID) is a bid rate; the rate bid by banks on Eurocurrency deposits (i.e., the rate at which a bank is willing to borrow from other banks). It is the "other end" of the LIBOR (an offered, hence "ask" rate, the rate at which a bank will lend).

Key takeaways

  • London Interbank Bid Rate belongs to science; place it in that map before memorising details.
  • Learn the definition first, then one example that makes the definition concrete.
  • Connect London Interbank Bid Rate to a quantity you can measure, compute or draw — that is where exam questions come from.
  • Reproduce the core statement of London Interbank Bid Rate from memory before moving on to harder problems.

Reference excerpt

The London Interbank Bid Rate (LIBID) is a bid rate; the rate bid by banks on Eurocurrency deposits (i.e., the rate at which a bank is willing to borrow from other banks). It is the "other end" of the LIBOR (an offered, hence "ask" rate, the rate at which a bank will lend). Whilst the British Bankers' Association set LIBOR rates, there is no correspondent official LIBID fixing. Conventional wisdom used to assert that a LIBID rate could be calculated by subtracting a fixed amount (often given as 1⁄8th of 1%) from the prevailing BBA LIBOR rate, however this is no longer the case as bid–offer spreads have tightened in recent years. Additionally, it cannot be the case that the LIBOR/LIBID spread is always 1⁄8th of 1% for all maturities and all currencies all the time.

External links British Bankers' Association Website

Worked examples

Example 1 — a first encounter with London Interbank Bid Rate

Start with the simplest possible case. Write down what London Interbank Bid Rate claims or describes in one sentence, then invent the smallest concrete situation in which that sentence is true. In science, the smallest case is usually a single object, a single equation or a single measurement. Check that every symbol or term in your sentence has a meaning in that case.

Example 2 — changing one variable

Take the situation from Example 1 and change exactly one quantity: double it, halve it, or set it to zero. Predict what should happen to London Interbank Bid Rate before you calculate. Comparing your prediction with the result is the fastest way to find out whether you understand the idea or only the words.

Example 3 — an exam-style question

Typical questions about London Interbank Bid Rate ask you to (a) state it precisely, (b) apply it to given data, and (c) explain a limitation. Practise writing all three answers in under five minutes; the third part is what separates a full-mark answer from an average one.

Applications of London Interbank Bid Rate

In research
London Interbank Bid Rate appears in science research whenever the underlying quantities have to be modelled precisely. Papers usually cite it as a starting assumption and then explore where it breaks down.
In technology and industry
Engineering practice reuses London Interbank Bid Rate in design rules, simulations and safety margins. Knowing the idea lets you read a specification sheet and understand why the numbers look the way they do.
In the classroom
London Interbank Bid Rate is common in secondary-school and first-year university syllabi. It links to neighbouring topics Bank stubs, Interest rates, so understanding it makes those chapters shorter.
In everyday life
Look for London Interbank Bid Rate outside the textbook — in sport, cooking, traffic, electronics or the sky above you. An example you found yourself is remembered far longer than one you were given.
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How to study London Interbank Bid Rate in 20 minutes

  1. Read the reference excerpt below once, without taking notes.
  2. Close the page and write down what London Interbank Bid Rate means in your own words.
  3. Compare your version with the excerpt and mark what you missed.
  4. Work through the three examples above with pen and paper.
  5. Explain London Interbank Bid Rate out loud to somebody else — or to Teacher Smith in the lgStudy chat.

Frequently asked questions

What is London Interbank Bid Rate in simple terms?

The London Interbank Bid Rate (LIBID) is a bid rate; the rate bid by banks on Eurocurrency deposits (i.e., the rate at which a bank is willing to borrow from other banks). It is the "other end" of the LIBOR (an offered, hence "ask" rate, the rate at which a bank will lend).

Why does London Interbank Bid Rate matter?

Because it connects several science ideas at once: it gives you a definition you can apply, a quantity you can calculate, and a way to check whether a result is plausible.

How should I study London Interbank Bid Rate?

Read the excerpt, restate it from memory, then work through the examples and applications listed on this page. The five-step study plan above takes about twenty minutes.

What does this page cover?

It gives you a compact reference excerpt plus original lgStudy explanations, examples, applications and study material on London Interbank Bid Rate.

Tags

  • Bank stubs
  • Interest rates

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