## How Blended Rates Work.

A blended rate is the average interest rate of two or more loans. The blended rate is determined by adding the interest rates of the loans and dividing by the number of loans. The blended rate is helpful when trying to compare loans with different interest rates. What is a blended payment? Blended payments are … Read more

## Interest Rate Parity (IRP).

IRP is an economic theory that states that the interest rate differential between two countries should be equal to the difference between the expected inflation rates of those countries. In other words, the interest rate in one country should equal the interest rate in another country plus or minus the expected inflation rate in that … Read more

## Capped Rate.

A capped rate is an interest rate that is allowed to rise to a certain predetermined level, after which it is capped, or fixed, at that level. This type of interest rate is often used in mortgage products, where the interest rate may be allowed to rise in line with market rates, but will not … Read more

## Tight Monetary Policy: Definition, How It Works, and Benefits.

Tight Monetary Policy: What It Is, How It Works, and Its Benefits What is the difference between a tight and loose monetary policy? A tight monetary policy is one in which the central bank (in the United States, this would be the Federal Reserve) raises interest rates in order to slow the economy and reduce … Read more

## How the Vasicek Interest Rate Model Works.

The Vasicek interest rate model is a mathematical model used to describe the evolution of interest rates over time. The model is named after its creator, Czech-American economist Oldrich Vasicek. The Vasicek model is a popular choice for modelling interest rates because it is relatively simple to understand and implement. The model is also easy … Read more

## How the London Interbank Bid Rate (LIBID) Works.

The London Interbank Bid Rate (LIBID) is the rate at which banks offer to lend funds to other banks in the London interbank market. The LIBID is used as a benchmark for a variety of financial instruments, including loans, bonds, and derivatives. LIBID is determined by the British Bankers’ Association (BBA) every day at 11:00 … Read more

## Stated Annual Interest Rate Definition.

The stated annual interest rate is the rate of interest that is stated on a loan or investment product. This is the rate that will be used to calculate the interest payments on the loan or investment. The stated annual interest rate is not necessarily the same as the actual interest rate that will be … Read more

## What Is the Mumbai Interbank Forward Offer Rate (MIFOR)?

The Mumbai Interbank Forward Offer Rate (MIFOR) is the rate at which banks offer to lend funds to one another in the forward market in Mumbai. This rate is used as a benchmark for pricing forward contracts in a number of currencies. What is meant by interbank? The interbank market is the global network of … Read more

## Interest Rate Derivative Definition.

An interest rate derivative is a financial contract whose value is derived from the performance of an underlying interest rate instrument. The most common type of interest rate derivative is a swap, which is a contractual agreement between two counterparties to exchange periodic payments based on different interest rate indices. What are the 5 derivatives? … Read more

## What Is the Key Rate?

The key rate is the interest rate that a central bank sets as its main policy tool to influence other interest rates in the economy. The key rate is also known as the “base rate.” What are common rates? Interest rates are the price of money, and they vary depending on the type of loan … Read more