Once upon a time there was a classical financial world in which all the
Libors were equal. Standard textbooks taught that simple relations held, such
that, for example, a 6 months Libor Deposit was replicable with a 3 months
Libor Deposits plus a 3x6 months Forward Rate Agreement (FRA), and that Libor
was a good proxy of the risk free rate required as basic building block of
no-arbitrage pricing theory. Nowadays, in the modern financial world after the
credit crunch, some Libors are more equal than others, depending on their rate
tenor, and classical formulas are history. Banks are not anymore too "big to
fail", Libors are fixed by panels of risky banks, and they are risky rates
themselves. These simple empirical facts carry very important consequences in
derivative's trading and risk management, such as, for example, basis risk,
collateralization and regulatory pressure in favour of Central Counterparties.
Something that should be carefully considered by anyone managing even a single
plain vanilla Swap. In this qualitative note we review the problem trying to
shed some light on this modern animal farm, recurring to an analogy with
quantum physics, the Zeeman effect