Basis points, abbreviated as "bps" (basis points), are a unit of measurement used to represent interest rates, yields, fees or other percentage changes. One basis point corresponds to one hundredth of a percent or 0.01 percent.
An increase of 1 basis point represents an increase of 0.01 percent, while a decrease of 1 basis point represents a decrease of 0.01 percent. Basis points are often used to quantify small percentage variations or differences in finance, particularly in interest rates, bond yields, loan terms and fee structures. They allow a more precise representation of changes, especially in environments with low interest rates or small percentage fluctuations.