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. |
Similar financial terms
Basis pointOne 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%.
Agency basis
A 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 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.
