The Euro Interbank Offered Rate (Euribor) is a daily reference rate, published by the European Money Markets Institute, based on the averaged interest rates at which Eurozone banks borrow unsecured funds from counterparties in the euro wholesale money market (before only in the interbank market). Prior to 2015, the rate was published by the European Banking Federation.
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👉 Euribor in the context of European Central Bank
The European Central Bank (ECB) is the central component of the Eurosystem and the European System of Central Banks (ESCB) as well as one of seven institutions of the European Union. It is one of the world's most important central banks with a balance sheet total of around 7 trillion.
The ECB Governing Council makes monetary policy for the Eurozone and the European Union, administers the foreign exchange reserves of EU member states, engages in foreign exchange operations, and defines the intermediate monetary objectives and key interest rate of the EU. The ECB Executive Board enforces the policies and decisions of the Governing Council, and may direct the national central banks when doing so. The ECB has the exclusive right to authorise the issuance of euro banknotes. Member states can issue euro coins, but the volume must be approved by the ECB beforehand. The bank also operates the T2 payments system.
In this Dossier
Euribor in the context of Market risk
Market risk is the risk of losses in positions arising from movements in market variables like prices and volatility.There is no unique classification as each classification may refer to different aspects of market risk. Nevertheless, the most commonly used types of market risk are:
- Equity risk, the risk that stock or stock indices (e.g. Euro Stoxx 50, etc.) prices or their implied volatility will change.
- Interest rate risk, the risk that interest rates (e.g. Libor, Euribor, etc.) or their implied volatility will change.
- Currency risk, the risk that foreign exchange rates (e.g. EUR/USD, EUR/GBP, etc.) or their implied volatility will change.
- Commodity risk, the risk that commodity prices (e.g. corn, crude oil) or their implied volatility will change.
- Margining risk results from uncertain future cash outflows due to margin calls covering adverse value changes of a given position.
- Shape risk
- Holding period risk
- Basis risk
The capital requirement for market risk is addressed under a revised framework known as "Fundamental Review of the Trading Book" (FRTB).