---
title: "Interest-rate markups"
description: "Interest-rate markups are the spreads Fincanva adds above a reference rate to model borrowing costs for leverage and for shorting inside a backtest."
canonical_url: "https://fincanva.com/docs/backtesting/interest-rate-markups"
last_updated: "2026-07-25"
md_url: "https://fincanva.com/docs/backtesting/interest-rate-markups.md"
---

# Interest-rate markups

Interest-rate markups are the spreads Fincanva adds on top of a reference rate to model what financing would cost inside a backtest. Borrowing money to use leverage, or borrowing shares to sell short, is not free in real markets — a broker charges a rate above the market reference rate — and the markups let the simulation reflect that cost. There are two: a **borrowing rate markup** for leverage and a **short rate markup** for shorting.

## How is the financing rate calculated?

The financing rate the simulation charges is the reference rate plus the relevant markup.

$$ \text{Financing rate} = \text{Reference rate} + \text{Markup} $$

where the reference rate is the market rate the model starts from and the markup is the spread added on top. The borrowing markup applies to capital borrowed for leverage; the short markup applies to the cost of borrowing securities to short.

## Defaults in Fincanva

- Two markups are modelled: a "Borrowing rate markup" (default 1.5%), described in the app as the "Spread added above the broker rate when borrowing capital", and a "Short rate markup" (default 2%), the "Spread added above the broker rate when shorting securities".
- Both are spreads over a reference rate, not the full rate themselves.
- They are applied only when costs are switched on; with costs off, modelled financing costs are zero.
- The resulting financing cost appears in the interest line of your capital and profit-and-loss breakdown.

## Worked example

A strategy runs a month with **leverage**, holding more exposure than its cash by borrowing capital. For that month the simulation charges interest on the borrowed portion at the reference rate **plus the 1.5% borrowing markup**, so the financing cost is higher than the reference rate alone. That charge shows up in the interest line of the [profit-and-loss breakdown](/docs/analysis/p-l-breakdown) as a drag on the month's result — the price, in the model, of carrying leverage. A short position would be charged the reference rate plus the 2% short markup in the same way.

*The markups are modelling assumptions applied to historical results, not the rate a broker will charge you, and nothing here is a suggestion to use leverage or to short. Fincanva provides no financial advice — see [Is this financial advice?](/docs/investing-theory/is-this-financial-advice).*