Question

Explain what LIBOR means and what is the difference between International Money Market, International Credit Market, and International Bond & Stock Markets?

Answer 1

LIBOR is the reference rate for unsecured short term loans in the inetrbank market globally. It is the interest rate at which global banks lend advances to one another. LIBOR includes commercial and hybrid products as well.

International money market:

The international money market is a market where international currency transactions are carried out within various banks of countries.The base is usually taken as dollar and commodity used is gold. Huge fund tranfers are involved in this market. Although investments are less risky.

International Credit Market:

In this market mainly companies and goverment is involved. They issue debt through commercial paper, small grade bonds.It is comparatively larger than equity market. In this market most of the debt is issued by the Government due to which it is the safest market.

International Bond & Stock Markets: Stocks are owned in the company which signifies ownership. Debts are issued by companies and Government to raise money where there is obligation to pay interest and maturity amount. In stocks, dividend to be paid or not is decided by company depending upon strategies and earnings. However stock market is very risky while bonds are risk free.