basis point

Definition

One hundredth of one percent (0.01%), because apparently regular percentages weren't confusing enough for finance professionals. When your mortgage rate increases by 25 basis points, congratulations—you're paying 0.25% more.

Example Usage

The Federal Reserve raised interest rates by 75 basis points, causing mortgage brokers everywhere to practice their sympathetic face in the mirror.

Origin

From mathematical basis terminology, adopted in finance by the 1970s to avoid ambiguity when discussing percentage changes

Fun Fact

Traders abbreviate basis points as 'bps' and pronounce it 'bips,' creating a whole new layer of impenetrable jargon.

Source: Standard financial markets terminology

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yield to maturity

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net interest margin

The difference between interest income banks earn on loans and interest they pay on deposits, expressed as a percentage. The fundamental measure of whether a bank's basic business model actually works.

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Operating Lease

A lease treated as a rental agreement rather than an asset purchase, historically kept off the balance sheet in a beautiful accounting loophole. Airlines loved these for planes; retail loved them for stores.

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