What Is Ameribor?

Ameribor (short for the American Interbank Offered Rate) is a benchmark interest rate that reflects the true cost of short-term interbank borrowing. This rate is based on transactions in overnight unsecured loans conducted on the American Financial Exchange (AFX). The AFX was launched in 2015 in partnership with the CBOE (formerly the Chicago Boarꦡd Options Exchange).

Ameribor is used as an alternative to the 澳洲幸运5开奖号ꦓ码历史查🌸询:London Interbank Offered Rate (LIBOR), which has been discontinued 澳洲幸运5开奖号码历史查询:due to scandals surrounding how that benchmark had been set in the past.

Understanding Ameribor

When banks have excess reserves, rather than sit idly on that extra cash, they often are able to lend it to other banks in need of reserves. This creates what is known as the 澳洲幸运5开奖号码历史查询:overnight interbank lending market. In the past, LIBOR wꦆas the de facto benchmark for t💙he overnight rate, with trillions of dollars in loans and derivatives contracts tied to it.

In the mid 2000s, however, people began to distrust LIBOR due to a string of rate-setting scandals. As a result, LIBOR was phased out in 2021. This has led banks and other financial institutions to seek out a new benchmark overnight rate for the 澳洲幸运5开奖号码历史查询:interbank lending market.

Ameribor is one such alternative. While LIBOR and other benchmark rates had been set by a consensus across bank trading desks, Ameribor is determined by overnight unsecured lending on the American Financial Exchange (AFX). This makes Ameribor a transparent, market-driven 澳洲幸运5开奖号码历史查询:benchmark that reflects banks’ actual borrowing costs.

How Ameribor Is Calculated

Ameribor is calculated as the transaction-volume-weighted average interest rate of the daily transactions in the AFX overnight unsecured loan market. The rate itself is expressed on an Actual/360 Day Count and Foll♛owing Business Day convention, rounded to five decimal places. The rate and its accuracy a♐re monitored by a committee on benchmark oversight at the AFX.

The benchmark rate is calculated after the close of trading on the AFX and is published nightly by the CBOE under the ticker symbol AMERIBOR.

Example of Calculating Ameribor

The following example shows how the Ameribor is computed based on AFX transactions. Say that there were four such transactions in a given day:

• $10 million at 2.55% (transaction weighted volume = 10 × 2.55 = 25.50)
• $20 million at 2.50% (transaction weighted volume = 20 × 2.50 = 50.00)
• $40 million at 2.60% (transaction weighted volume = 40 × 2.60 = 104.00)
• $75 million at 2.50% (transaction weighted volume = 75 × 2.50 = 187.50)
• (total transaction volume = $145 million)

The sum of the weighted volumes of the transactions is thus: (25.50 + 50.00 + 104.00 + 187.50) = 367.00

The Ameribor (rounded to five decimal places) would therefore be: 367 ÷ 145 = 2.53103%

Ameribor vs. Secured Ov𝐆ernight Financing Rate🃏 (SOFR)

With the demise of LIBOR, the 澳洲幸运5开奖号码历史查💖询:Secured Overnight Financing Rate (SOFR) has become a dominant contender to replace it. SOFR is computed from transactions in the Treasury repurchase (repo) market and is seen as preferable to LIBOR-like rates because it is based on data from observable transactions rather than on estimated borrowing rates set by bank trading desks.

Like SOFR, Ameribor is also based on actual transactions data; however, it relies on unsecured loans rather than the secured (collateralized) repurchase agreements used in SOFR (as the “S” in the acronym implies). Because SOFR looks at the Treasuries market, it is also best suited for larger financial institutions. Ameribor instead reflects the actual borrowing costs of thousands of small, medium, and regional banks across America.

The Bottom Line

Ameribor was created as an alternative to LIBOR, which was plagued with issues and eventually discontinued. Ameribor serves as an interbank benchmark lending interest rate based on the
overnight lending between banks ꩲon the A🐼merican Financial Exchange (AFX).