I would like to ask for your advice regarding pricing interest rates in relation to commercial loans (e.g. corporates, SMEs) . Any suggestions / recommendations on which method that is more appropriate in pricing interest rates? is bond yield plus risk premium appropriate? many thanks.
Depends on the commercial loan. There is no rate that is universal for all commercial lending.
It’s always LIBOR plus a spread. The spread usually depends on the type of loan, collateral, etc. Many factors go into the spread, and its beyond any individual’s influence.
Could also be WSJ Prime plus a spread or just a simple fixed rate. LIBOR goes to the best customers, WSJ Prime for the others on variable rates.