Basis point

Basis point is a precise financial unit equal to 0.01% or one-hundredth of a percentage point. It is the standard metric used to describe small changes in interest rates, credit spreads, and other financial instruments. Basis points help eliminate confusion by offering a clear and universally understood way to express percentage changes that might otherwise be misread in decimal form.

This level of precision is especially important in high-value transactions, where even small percentage shifts can translate into millions of dollars in gains or losses. The consistent use of basis points also ensures clear communication between financial professionals, regulators, and institutional investors who rely on exact specifications when evaluating yields, spreads, and performance metrics.