Cost of funding
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The interest rate one would have to pay to borrow an amount of money. This will be be expressed as a spread over a benchmark, but will be a function of the market’s consensus as to your creditworthiness. useful when determining default interest[1], breakage costs and that sort of thing.
- ↑ I can charge you default interest on the amount you owe but haven’t paid me at my cost of funding — you not having paid me a sum being the same as me having to borrow that sum from someone else, so an out-of-pocket cost — plus a spread for my trouble.