A basis point (often abbreviated as bp, often pronounced as "bip" or "beep") is one hundredth of 1 percentage point. The related term '' permyriad'' means one hundredth of 1 percent. Changes of interest rates are often stated in basis points. If an interest rate of 10% increased by 1 bp, it changed to 10.01%.

^{−4} or or 0.0001.
:10 bp = (a difference of) 0.1% or 1‰ or 10‱.
:100 bp = (a difference of) 1% or 10‰ or 100‱.
Basis points are used as a convenient unit of measurement in contexts where percentage differences of less than 1% are discussed. The most common example is

Definition

:1 basis point (bp) = (a difference of) 1‱ or 0.01% or 0.1‰ or 10interest rate
An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, th ...

s, where differences in interest rates of less than 1% per year are usually meaningful to talk about. For example, a difference of 0.10 percentage points is equivalent to a change of 10 basis points (e.g., a 4.67% rate increases by 10 basis points to 4.77%). In other words, an increase of 100 basis points means a rise by 1 percentage point.
Like percentage points, basis points avoid the ambiguity between relative and absolute discussions about interest rates by dealing only with the absolute change in numeric value of a rate. For example, if a report says there has been a "1% increase" from a 10% interest rate, this could refer to an increase either from 10% to 10.1% (relative, 1% of 10%), or from 10% to 11% (absolute, 1% plus 10%). However, if the report says there has been a "100 basis point increase" from a 10% interest rate, then the interest rate of 10% has increased by 1.00% (the absolute change) to an 11% rate.
It is common practice in the financial industry to use basis points to denote a rate change in a financial instrument, or the difference ( spread) between two interest rates, including the yields of fixed-income
Fixed income refers to any type of investment under which the borrower or issuer is obliged to make payments of a fixed amount on a fixed schedule. For example, the borrower may have to pay interest at a fixed rate once a year and repay the pr ...

securities.
Since certain loans and bonds may commonly be quoted in relation to some index or underlying security, they will often be quoted as a spread over (or under) the index. For example, a loan that bears interest of 0.50% per annum above the London Interbank Offered Rate
The London Inter-Bank Offered Rate is an interest-rate average calculated from estimates submitted by the leading banks in London. Each bank estimates what it would be charged were it to borrow from other banks. The resulting average rate is u ...

(LIBOR) is said to be 50 basis points over LIBOR, which is commonly expressed as "L+50bps" or simply "L+50".
The term "basis point" has its origins in trading the "basis" or the spread between two interest rates. Since the basis is usually small, these are quoted multiplied up by 10,000, and hence a "full point" movement in the "basis" is a basis point. Contrast with pips in FX forward markets.
Expense ratio The expense ratio of a stock or asset fund is the total percentage of fund assets used for administrative, management, advertising (12b-1), and all other expenses. An expense ratio of 1% per annum means that each year 1% of the fund's total assets ...

s of investment funds are often quoted in basis points.
Permyriad

A related concept is one part per ten thousand, . The same unit is also (rarely) called a permyriad, literally meaning "for (every) myriad (ten thousand)". If used interchangeably with basis point, the permyriad is potentially confusing because an increase of one basis point to a 10 basis point value is generally understood to mean an increase to 11 basis points; not an increase of one part in ten thousand, meaning an increase to 10.001 basis points. This is akin to the difference betweenpercentage
In mathematics, a percentage (from la, per centum, "by a hundred") is a number or ratio expressed as a fraction of 100. It is often denoted using the percent sign, "%", although the abbreviations "pct.", "pct" and sometimes "pc" are also u ...

and percentage point.
Unicode

A permyriad is written with which looks like a percent sign with three zeroes to the right of the slash. (It can be regarded as a stylized form of the four zeros in thedenominator
A fraction (from la, fractus, "broken") represents a part of a whole or, more generally, any number of equal parts. When spoken in everyday English, a fraction describes how many parts of a certain size there are, for example, one-half, eight ...

of "", although it originates as a natural extension of the percent
In mathematics, a percentage (from la, per centum, "by a hundred") is a number or ratio expressed as a fraction of 100. It is often denoted using the percent sign, "%", although the abbreviations "pct.", "pct" and sometimes "pc" are also u ...

and permille signs.)
Related units

* Percentage point difference of 1 part in 100 *Percentage
In mathematics, a percentage (from la, per centum, "by a hundred") is a number or ratio expressed as a fraction of 100. It is often denoted using the percent sign, "%", although the abbreviations "pct.", "pct" and sometimes "pc" are also u ...

(%) 1 part in 100
* Per mille
Per mille (from Latin , "in each thousand") is an expression that means parts per thousand. Other recognised spellings include per mil, per mill, permil, permill, or permille.
The associated sign is written , which looks like a percent ...

(‰) 1 part in 1,000
* Per cent mille
A per cent mille or pcm is one one-thousandth of a percent. It can be thought of as a "milli-percent". It is commonly used in epidemiology, and in nuclear reactor engineering as a unit of reactivity.
Epidemiology
Statistics of crime rates, morta ...

(pcm) 1 part in 100,000
* Parts per million (ppm) 1 part in 1,000,000
See also

*Parts-per notation
In science and engineering, the parts-per notation is a set of pseudo-units to describe small values of miscellaneous dimensionless quantities, e.g. mole fraction or mass fraction. Since these fractions are quantity-per-quantity measures, they ...

* Per-unit system In the power systems analysis field of electrical engineering, a per-unit system is the expression of system quantities as fractions of a defined base unit quantity. Calculations are simplified because quantities expressed as per-unit do not chan ...

* Percent point function
In probability and statistics, the quantile function, associated with a probability distribution of a random variable, specifies the value of the random variable such that the probability of the variable being less than or equal to that value ...

* Tick size
References

External links

* {{navbox punctuation Fixed income Typographical symbols Interest rates Operations of central banks