Questions / Quant trading, Execution & microstructure
Translate basis points into cost
An execution fee is 3 basis points of 200,000 notional. What is the fee?
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Answer: 60 currency units
- A basis point is 0.01%, or 0.0001 as a fraction.
- Three basis points is therefore 3/10,000 = 0.0003.
- Multiply by the fee base: 200,000 × 0.0003 = 60.
Interview shortcut. A basis point is 1/10,000: 200,000 × 3/10,000.
Takeaway. Convert basis points to a fraction before multiplying by notional.
In the app this has a follow-up where one thing about the setup changes. Try the follow-up.