A basis point (bp) is a unit of measurement equal to one hundredth of a percentage point. In the context of
securitization, basis points are often used to measure interest rates, credit spreads, and other financial variables.
For example, a 100 basis point increase in interest rates would be equivalent to an increase of 1%. A 50 basis point credit spread would be equivalent to a spread of 0.5%.
Basis points are a convenient way to measure small changes in financial variables. They are also used to compare different financial instruments. For example, a
bond with a yield of 5% has a higher yield than a bond with a yield of 4.5% by 50 basis points.
Here are some additional details about basis points in relation to securitization:
- Basis points are often used to measure the yield of bonds and other fixed-income securities.
- Basis points are also used to measure the credit spread between different types of securities.
- Basis points can be used to compare the cost of different types of financing.
- Basis points are a convenient way to measure small changes in financial variables.