A basis point is a unit of measure used in finance to describe the percentage change in the value or rate of a financial instrument. One basis point is equal to 0.01%, or one hundredth of a percent.
For example, if the interest rate on a loan increases from 4% to 4.25%, this would be a 25 basis point increase.
Similarly, if the price of a stock increased from $100 to $101, this would be a 1 basis point increase. Basis points are often used in finance to express very small changes in value or rate, and they are commonly used to describe changes in interest rates or other financial metrics.
