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Can we use USD LIBOR as spot rates for discounting?

If we have overnight LIBOR and say 1 month LIBOR how to compute 16 day LIBOR? Can we do interpolation?

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First question can't be answered without knowing what you are discounting.

Second question you are asking whether the rate of a 16 day interbank loan can be obtained from interpolating an overnight rate and a 1 month bank loan. I would say it is a reasonable guess.

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  • $\begingroup$ Thanks for your reply. For the first question - can i use 3 month libor for discounting cash flow receivable after 3 month. $\endgroup$ – onkar Jun 24 '17 at 13:15
  • $\begingroup$ It depends upon the riskiness of the cashflow. If you are owed by a highly creditworthy source like a big bank, then 3 month libor is appropriate. If the cashflow is from a risky investment , a higher rate would be appropriate. $\endgroup$ – dm63 Jun 24 '17 at 14:34

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