Basis point
One hundredth of 1 percent (0.01%). In the bond market, the smallest measure used for quoting yields is a basis point. Each percentage point of yield in bonds equals 100 basis points. basis points also are used for interest rates. An interest rate of 10% is 50 basis points greater than an interest rate of 10.5%. |
Similar financial terms
Agency basisA means of compensating the broker of a program trade solely on the basis of commission established through bids submitted by various brokerage firms. agency incentive arrangement. A means of compensating the broker of a program trade using benchmark prices for issues to be traded in determining commissions or fees.
Price value of a basis point (PVBP)
Also called the dollar value of a basis point, a measure of the change in the price of the bond if the required yield changes by one basis point.
Bank discount basis
A convention used for quoting bids and offers for treasury bills in terms of annualized yield , based on a 360-day year.
Basis
Regarding a futures contract, the difference between the cash price and the futures price observed in the market. Also, it is the price an investor pays for a security plus any out-of-pocket expenses. It is used to determine capital gains or losses for tax purposes when the stock is sold.
Basis price
Price expressed in terms of yield to maturity or annual rate of return.
Basis risk
The uncertainty about the basis at the time a hedge may be lifted. Hedging substitutes basis risk for price risk.
Bond-equivalent basis
The method used for computing the bond-equivalent yield.
Adjusted basis
The cost of property after adjustment for certain deductions or additions as permitted or prescribed by the U.S. tax laws. In some instances, the basis of property is derived from the basis of other parties - such as a donor or an estate.
Point and figure chart
A price-only chart that takes into account only whole integer changes in price, i.e., a 2-point change. Point and figure charting disregards the element of time and is solely used to record changes in price.
Bond points
A conventional unit of measure for bond prices set at $10 and equivalent to 1% of the $100 face value of the bond. A price of 80 means that the bond is selling at 80% of its face, or par value.
Cash-flow break-even point
The point below which the firm will need either to obtain additional financing or to liquidate some of its assets to meet its fixed costs.
Point-And-Figure
A method of charting which uses prices to form patterns of movement without regard to time. It defines a price trend as a continued movement in one direction until a reversal of a predetermined criterion is met.
Point
A measure of price change equal to 1/100 of one cent in most futures traded in decimal units. In grains, it is of one cent; in T-bonds, it is one percent of par.
