Community Forex Questions
What is a basis point?
A basis point is a unit of measurement used to quantify the difference between two percentages; it is also abbreviated as 'bp,' which is pronounced 'bip' or 'beep'. A basis point, or 0.01%, is one hundredth of one percent.
This means that a 0.01% change is equivalent to a one-bp move, a 1% change is equivalent to a 100-bp move, and a 10% change is equivalent to a 1000-bp move.
Basis points are commonly used to describe interest rates, stock market price changes, and the cost of exchange-traded funds and mutual funds. They assist traders and analysts in clarifying the difference between two percentages; for example, instead of saying a 10% increase on a 10% rate, it can be described as a 1000 basis point change. By developing a universal measure, any uncertainty about price and interest rate movements is eliminated.
This means that a 0.01% change is equivalent to a one-bp move, a 1% change is equivalent to a 100-bp move, and a 10% change is equivalent to a 1000-bp move.
Basis points are commonly used to describe interest rates, stock market price changes, and the cost of exchange-traded funds and mutual funds. They assist traders and analysts in clarifying the difference between two percentages; for example, instead of saying a 10% increase on a 10% rate, it can be described as a 1000 basis point change. By developing a universal measure, any uncertainty about price and interest rate movements is eliminated.
Sep 08, 2022 00:53