These rates implicitly assume that this is the cheapest way each party can hedge its interest rate
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These rates implicitly assume that this is the cheapest way each party can hedge its interest rate exposure. For example, LIBOR plus 1.5 percent is the lowest cost way that the money center bank can transform its fixed-rate liabilities into floating-rate liabilities.
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Related Book For 
Financial Markets And Institutions
ISBN: 9781259919718
7th Edition
Authors: Anthony Saunders, Marcia Cornett
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