Full Form of BP
Basis Point
BP Full Form is Basis Point. BP is a mathematical unit that is mainly used in financial sectors. This is a convenient alternative for the percentage measurement. In a case of the percentage, measurement is too small, BP units come into use. 1BP is equal to 0.01%, therefore, 10000BPs are equal to 100%. BP units are used in financial sectors to conveniently measure the change in interest rate or in any other financial instrument.
It does not implement relative values. Rather BPs give emphasis on the measurement of absolute values. For example, if we apply relative values, 1% increase in 20% may mean that the new percentage unit is 20.2% (measuring 1% relative to 10%). But, if we calculate the absolute value, then 1% increase in 20% means that the new unit is 21%.
In this way, it is rather convenient to use BP units. Because 100 BPs increase in 20% readily and absolutely mean that the new amount is 21%. BPs are used to calculate interest rates and stock assets. BPs measure the base movement in two different rates. These movements are usually small changes that may result in outsized outcomes. So the basis of BPs is the value of a fraction of the percentage unit. This system is widely used and it is often considered as a standard unit.