Interbank offered rates are benchmark interest rates at which a selection of banks can borrow and lend to one another in a given currency on a short-term basis. However, these rates are only available for certain tenors thereby creating the need to interpolate rates for tenors without directly...

We propose and test a new channel that links funding liquidity risk and interest rates in short-term funding markets. Borrowers with high liquidity risk are willing to pay a markup to lock in their funding, independent of risk premiums demanded by lenders. We test the channel using unique...

The London Interbank Offered Rate (LIBOR) is a widely used indicator of funding conditions in the interbank market. As of 2013, LIBOR underpins more than $300 trillion of financial contracts, including swaps and futures, in addition to trillions more in variable-rate mortgage and student loans....