What are Basis Points (BPS)? In finance, Basis Points (BPS) are a unit of measurement equal to 1/100th of 1 percent. BPS are used for measuring interest rates, the yield of a fixed-income security, and other percentages or rates used in finance. This metric is commonly used for loans and bonds to signify percentage changes or…
What is Basel III? The Basel III accord is a set of financial reforms that was developed by the Basel Committee on Banking Supervision (BCBS), with the aim of strengthening regulation, supervision, and risk management within the banking industry. Due to the impact of the 2008 Global Financial Crisis on banks, Basel III was introduced…
What is the Quick Ratio? The Quick Ratio, also known as the Acid-test or Liquidity ratio, measures the ability of a business to pay its short-term liabilities by having assets that are readily convertible into cash. These assets are, namely, cash, marketable securities, and accounts receivable. These assets are known as “quick” assets since they can…
What is the Market Risk Premium? The market risk premium is the additional return an investor will receive (or expects to receive) from holding a risky market portfolio instead of risk-free assets. The market risk premium is part of the Capital Asset Pricing Model (CAPM) which analysts and investors use to calculate the acceptable rate…
What is YoY? YoY stands for Year over Year and is a type of financial analysis that’s useful when comparing time series data. Analysts are able to deduce changes in the quantity or quality of certain business aspects with YoY analysis. In finance, investors usually compare the performance of financial instruments on a year-over-year basis…
What is the Difference Between EBIT and EBITDA? The difference between EBIT and EBITDA is that Depreciation and Amortization have been added back to Earnings in EBITDA, while they are not backed out of EBIT. This guide on EBIT vs EBITDA will explain everything you need to know! EBIT stands for: Earnings Before Interest and Taxes….
What is the Coupon Rate? The coupon rate is the amount of annual interest income paid to a bondholder, based on the face value of the bond. Government and non-government entities issue bonds to raise money to finance their operations. When a person buys a bond, the bond issuer promises to make periodic payments to…
What is a Floating Interest Rate? A floating interest rate refers to a variable interest rate that changes over the duration of the debt obligation. It is the opposite of a fixed interest rate, where the interest rate remains constant throughout the life of the debt. Loans, such as residential mortgages, can be acquired at both…
What is an Interest Rate Swap? An interest rate swap (IRS) is a type of derivative contract through which two counterparties agree to exchange one stream of future interest payments for another, based on a specified principal amount. In most cases, interest rate swaps include the exchange of a fixed interest rate for a floating…
What is a Dutch Auction? A Dutch auction is a price discovery process in which the auctioneer starts with the highest asking price and lowers it until it reaches a price level where the bids received will cover the entire offer quantity. Alternatively, a Dutch auction is known as a descending price auction or a uniform…
