Basis Point (BPS)
A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly used for calculating changes in interest rates, equity indexes and the yield of a fixed-income security. Investopedia Says:
The relationship between percentage changes and basis points can be summarized as follows: 1% change = 100 basis points, and 0.01% = 1 basis point.
So, a bond whose yield increases from 5% to 5.5% is said to increase by 50 basis points; or interest rates that have risen 1% are said to have increased by 100 basis points. Related Terms:
Basis Rate Swap
Bond
Federal Open Market Committee - FOMC
Guarantee Fees
Interest Rate
Pip
Yield |