Margin

Definition

Margin is the amount added to a lower figure to reach a higher figure, expressed as a percentage of the higher figure.

In the context of Asset and Liability Management (ALM) margin is defined as the ‘premium’ charged/paid by financial institution over the instrument’s/ portfolio’s Reference Interest Rate, and is equal to the spread between the actual Effective Interest Rate of the instrument and the reference rate. More generally it is a variable that is added to a specified index rate to determine the fully indexed interest rate charged to a borrower on a credit balance.

Example

• It is the percentage margin added to the cost of funds or a base rate to establish the interest rate or discount charge.
• The margin that profit represents as a percentage of selling price.

Synonyms

• Spread

Disclaimer

This entry annotates a FIBO Ontology Class. FIBO is a trademark and the FIBO Ontology is copyright of the EDM Council, released under the MIT Open Source License. There is no guarantee that the content of this page will remain aligned with or correctly interprets the concepts covered by the FIBO ontology.