Harvey's

Hypertextual Finance Glossary

Copyright © 2023. All Worldwide Rights Reserved. Do not reproduce without explicit permission.

Keep up to date on the latest finance lingo with the new iPad/iPhone app

Download from iTunes

Order Campbell Harvey's book on the future of finance

Order via Amazon

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z #

T: Fifth letter of a Nasdaq stock symbol indicating that the stock has warrants or rights.
TAA: See: Tactical asset allocation
TAF: See: Term Auction Facility
TABs: See: Tax anticipation bill
TALF: See: Term Asset-Backed Securities Loan Facility
TANs: See: Tax anticipation notes
TARP: See: Troubled Asset Relief Program
TBA: See: To be announced
TBAC: See: Treasury Borrowing Advisory Committee
TBTF: See: Too Big to Fail
TC: The two-character ISO 3166 country code for TURKS AND CAICOS ISLANDS.
TCA: The three-character ISO 3166 country code for TURKS AND CAICOS ISLANDS.
TCD: The three-character ISO 3166 country code for CHAD.
TD: The two-character ISO 3166 country code for CHAD.
TEFRA: See: Tax Equity and Fiscal Responsibility Act of 1983
TF: The two-character ISO 3166 country code for FRENCH SOUTHERN TERRITORIES.
TG: The two-character ISO 3166 country code for TOGO.
TGO: The three-character ISO 3166 country code for TOGO.
TH: The two-character ISO 3166 country code for THAILAND.
THA: The three-character ISO 3166 country code for THAILAND.
THB: The ISO 4217 currency code for the Thai Baht.
TIGER: See: Treasury Investors Growth Receipt
TIIS: See: Treasury inflation-indexed securities
TIPS: See: Treasury inflation-proteced securities
TITAL: See: Transaction insured trade acceptance locator
TJ: The two-character ISO 3166 country code for TAJIKISTAN.
TJK: The three-character ISO 3166 country code for TAJIKISTAN.
TJR: The ISO 4217 currency code for the Tajikistan Rouble.
TK: The two-character ISO 3166 country code for TOKELAU.
TKL: The three-character ISO 3166 country code for TOKELAU.
TKM: The three-character ISO 3166 country code for TURKMENISTAN.
TL: The two-character ISO 3166 country code for TIMOR-LESTE.
TLS: The three-character ISO 3166 country code for TIMOR-LESTE.
TM: The two-character ISO 3166 country code for TURKMENISTAN.
TMM: The ISO 4217 currency code for the Turkmenistan Manet.
TN: The two-character ISO 3166 country code for TUNISIA.
TNCs: Transnational corporations. Corporations with business in multiple countries.
TND: The ISO 4217 currency code for the Tunisian Dinar.
TO: The two-character ISO 3166 country code for TONGA.
TON: The three-character ISO 3166 country code for TONGA.
TOP: The ISO 4217 currency code for the Tonga Pa'anga.
TP: The two-character ISO 3166 country code for EAST TIMOR.
TR: The two-character ISO 3166 country code for TURKEY.
TRL: The ISO 4217 currency code for the Turkish Lira.
TSLF: See: Term Securities Lending Facility.
TSP: See: Thrift Savings Plan
TT: The two-character ISO 3166 country code for TRINIDAD AND TOBAGO.
TTD: The ISO 4217 currency code for the Trinidad and Tobago Dollar.
TTM: Trailing 12 months. Often used with Earnings Per Share.
TTO: The three-character ISO 3166 country code for TRINIDAD AND TOBAGO.
TUN: The three-character ISO 3166 country code for TUNISIA.
TUR: The three-character ISO 3166 country code for TURKEY.
TUV: The three-character ISO 3166 country code for TUVALU.
TV: The two-character ISO 3166 country code for TUVALU.
TW: The two-character ISO 3166 country code for TAIWAN, PROVINCE OF CHINA.
TWD: The ISO 4217 currency code for the Taiwan Dollar.
TWN: The three-character ISO 3166 country code for TAIWAN, PROVINCE OF CHINA.
TZ: The two-character ISO 3166 country code for TANZANIA, UNITED REPUBLIC OF.
TZA: The three-character ISO 3166 country code for TANZANIA, UNITED REPUBLIC OF.
TZS: The ISO 4217 currency code for the Tanzania Shilling.
T-period holding-period return: The percentage return over the T-year period an investment is held.
T+3: The settlement date for securities transactions such as a stock sale. It refers to the obligation in the brokerage business to settle securities trades by the third day following the trade date. The settlement occurs when the seller receives the sales price (the broker's commission) and the buyer receives the shares.
Tabulation Report: A proxy tally report detailing the current quorum and vote figures on each proposal.
TAC bonds: See: Targeted amortization class bond.
T-account: A simplified representation of the actual accounts used for record-keeping. Called T-account because it looks like the letter T with debits under the left arm and credits under the right arm.

Tactical Asset Allocation (TAA): Portfolio strategy that allows active departures from the normal asset mix according to specified objective measures of value. Often called active management. It involves forecasting asset returns, volatilities, and correlations. The forecasted variables may be functions of fundamental variables, economic variables, or even technical variables.
Tail: 1. Often refers to extreme risk. In terms of a distribution, the left tail represents extreme negative realizations. Importantly, there are two tails. The right tail refers to extreme positive realizations. 2. The remaining reserves after a project financing has been repaid. Sometimes refers to the residual value.
Tail Risk: Usually refers to the left side of a probability distribution which represents extreme negative events. Tail risk is related to negative skewness. Tail risk can be managed. For example, the purchase of a put option reduces tail risk.
Tailgating: Purchase of a security by a broker after the broker places an order for the same security for a customer. The broker hopes to profit either because of information which the customer has or because the customer's purchase is of sufficient size to affect security prices. This is an unethical practice.
Taiwan Stock Exchange (TSEC): Established in 1961, the only centralized securities market in Taiwan.
Take: (1) To agree to buy. A dealer or customer who agrees to buy at another dealer's offered price is said to take the offer. (2) Euro bankers speak of taking deposits rather than buying money.
Take a bath: To sustain a loss on either a speculation or an investment.
Take a flier: To speculate on highly risky securities.
"Take it down": Reduce the offering price or hit others' bids to such an extent as to lower the inside market.
"Take me along": "Allow me to participate in the side of a particular trade.
Take off: A sharp increase in the price of a stock, or a positive movement of the market as a whole.
Take the offer: Buy stock by accepting a floor broker's (listed) or dealer's (OTC) offer at an agreed-upon volume. Antithesis of hit the bid.
Take-out: A cash surplus generated by the sale of one block of securities and the purchase of another, e.g., selling a block of bonds at 99 and buying another block at 95. Also, a bid made to a seller of a security that is designed (and generally agreed) to take the seller out of the market.
Take-and-pay contract: An agreement that obligates the purchaser to take any product that is offered (and pay the cash purchase price) and pay a specified amount if the product is not taken.
Take a position: To buy or sell short; that is to own or to owe some amount on an asset or derivative security.
Take a powder: Temporarily cancel an order or indication in a stock, while unrepresented interest still exists. See: Back on the shelf, sidelines.
Take a swing: Execute a trade at a price that the trader feels is higher or more risky than would normally be acceptable, in order to gain market share in the institutional arena.
Takedown: The share of securities of each participating investment banker in a new or a secondary offering, or the price at which the securities are distributed to the different members of an underwriting group.
Takeout: A financing to refinance or take out another loan.
Take-out merger: See Clean-up merger.
Takeover: General term referring to transfer of control of a firm from one group of shareholders to another group of shareholders. Change in the controlling interest of a corporation, either through a friendly acquisition or an unfriendly, hostile, bid. A hostile takeover (with the aim of replacing current existing management) is usually attempted through a public tender offer.
Takeover target: A company that is the object of a takeover attempt, friendly or hostile.
Take-up fee: A fee paid to an underwriter in connection with an underwritten rights offering or an underwritten forced conversion. Represents compensation for each share of common stock the underwriter obtains and must resell upon the exercise of rights or conversion of bonds.
Takes a call: Requires a phone call to an account in order for a trade to be completed. See: Show me.
Takes price: Requiring some price movement or concession on behalf of the initiating party before a trade can be consummated. See: Price give.
Taking delivery: When the buyer actually assumes possession from a seller of assets agreed upon in a forward contract or a futures contract.
Taking a view: A London expression; means forming an opinion as to where market prices are headed and acting on it.
Tandem programs: Ginnie Mae mortgage funds provided at below-market rates to residential MBS buyers with FHA Section 203 and 235 loans and to developers of multifamily projects with Section 236 loans initially and later with Section 221(d)(4) loans.
Tangible asset: An asset whose value depends on particular physical properties. These include reproducible assets such as buildings or machinery and non-reproducible assets such as land, a mine, or a work of art. Also called real assets. Converse of: Intangible asset
Tangible net worth: Total assets minus intangible assets, which include patents and copyrights, and total liabilities.
Tangibility: Characteristic that an assets can be used as collateral to secure debt.
Tape: (1) Service that reports prices and sizes of transactions on major exchanges-ticker tape. (2) Dow Jones and other news wires. See: Consolidated tape.
Tape is late: When the trading volume is so heavy that trades appear on the tape more than a minute behind the timer they actually take place.
Tare Weight: The weight of an empty container and any packaging materials used in the container.
Tariff: A tax on imports or exports.
Target cash balance: Optimal amount of cash for a firm to hold, considering the trade-off between the opportunity costs of holding too much cash and the trading costs of holding too little cash.
Target company: Often used in risk arbitrage. Firm chosen as an attractive takeover candidate by a potential acquirer. The acquirer may buy up to 5% of the target's stock without public disclosure, but it must report all transactions and supply other information to the SEC, the exchange the target company is listed on, and the target company itself once the 5% threshold is hit. See: Raider.
Target firm: A firm that is the object of a takeover by another firm.
Target investment mix: The percentage mix of stocks, bonds, and short-term reserves that an investor considers appropriate based on his/her personal objectives, time horizon, risk tolerance, and financial resources.
Target Leverage Ratio: The ratio of the market value of debt to the total market value of the firm that management seeks to maintain.
Target payout ratio: A firm's long-run dividend-to-earnings ratio. The firm's policy is to attempt to pay out a certain percentage of earnings, but it pays a stated dollar dividend and adjusts it to the target as base line increases in earnings occur.
Target price: In the context of takeovers, the price at which an acquirer aims to buy a target firm.
In the context of options, the price of the underlying security at which an option will become in the money.
In the context of stocks, the price that an investor hopes a stock will reach in a certain time period.
Target zone arrangement: A monetary system under which countries pledge to maintain their exchange rates within a specific margin around agreed-upon, fixed central exchange rates.
Target zones: Implicit boundaries on exchange rates established by central banks.
Targeted registered offerings: Securities issues sold to "targeted" foreign financial_institutions according to U.S. Securities and Exchange Commission guidelines. These foreign institutions then maintain a secondary market in the foreign market.
Targeted repurchase: Buying back of a firm's stock from a potential acquirer, usually at a substantial premium, to forestall a takeover attempt. Related: Greenmail.
Targeted Amortization Class (TAC) bonds: Bonds offered as a tranche class of some CMOs, according to a sinking fund schedule. They differ from PAC bonds whose amortization is guaranteed as long as prepayments on the underlying mortgages do not exceed certain limits. A TAC's schedule is met at only one prepayment rate.
Tax accounting: Accounting for tax calculation and preparation. Treatment of tax may be different for purpose of reporting to tax authorities as compared to GAAP.
Tax anticipation bills (Tabs): Special bills that the Treasury occasionally issues that mature on corporate quarterly income tax dates and can be used at face value by corporations to pay their tax liabilities.

Tax Anticipation Notes (Tans): Notes issued by states or municipalities to finance current operations in anticipation of future tax receipts.
Tax arbitrage: Trading that takes advantage of a difference in tax rates or tax systems as the basis for profit.
Tax audit: Audit by the IRS or other tax-collecting agency to determine whether a taxpayer has paid the correct amount of tax.
Tax avoidance: Minimizing tax burden through legal means such as tax-free municipal bonds, tax shelters, IRA accounts, and trusts. Compare with tax evasion.
Tax base: The assessed value of the taxable property, assets, and income within a specific geographic area.
Tax basis: In the context of finance, the original cost of an asset less depreciation that is used to determine gains or losses for tax purposes.
In the context of investments, the price of a stock or bond plus the broker's commission.
Tax books: Records kept by a firm's management that follow IRS rules. The books follow Financial Accounting Standards Board rules.
Tax bracket: The percentage of tax obligation for a particular taxable income.
Tax clawback agreement: An agreement to contribute as equity to a project the value of all previously realized project-related tax benefits not already clawed back. Exercised to the extent required to cover any cash deficiency of the project.
Tax clientele: Categories of investors who have specific preferences for debt or equity because of differences in their personal tax rates.
Tax credit: A direct dollar-for-dollar reduction in tax allowed for expenses such as child care and R&D for building low-income housing. Compare tax deduction.
Tax-deductible: The effect of creating a tax deduction, such as charitable contributions and mortgage interest.
Tax deduction: An expense that a taxpayer is allowed to deduct from taxable income.
Tax-deferred income: Dividends, interest, and unrealized capital gains on investments in an account such as a qualified retirement plan, where income is not subject to taxation until a withdrawal is made.
Tax deferral option: Allowing the capital gains tax on an asset to be payable only when the gain is realized by selling the asset.
Tax-deferred retirement plans: Employer-sponsored and other plans that allow contributions and earnings to be made and accumulate tax-free until they are paid out as benefits.
Tax differential view (of dividend policy): The view that shareholders prefer capital gains over dividends, and hence low payout ratios, because capital gains are effectively taxed at lower rates than dividends.
Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA): Legislation to increase tax revenue by eliminating various taxation loopholes and instituting tougher enforcement procedures in collecting taxes.
Tax-equivalent yield: The pre-tax yield required from a taxable bond in order to equal the tax-free yield of a municipal bond.
Tax evasion: Illegal by reducing tax burden by underreporting income, overstating deductions, or using illegal tax shelters.
Tax-exempt bond: A bond usually issued by municipal, county, or state governments whose interest payments are not subject to federal and, in some cases, state and local income tax.
Tax-exempt income: Dividends and interest not subject to federal and, in some cases, state and local income taxes.
Tax-exempt income fund: A mutual fund that seeks income that is exempt from federal and, in some cases, state and local income taxes.
Tax-exempt money market fund: A money market fund that invests in short-term tax-exempt municipal securities.
Tax-exempt sector: The municipal bond market where state and local governments raise funds. Bonds issued in this sector are exempt from federal income taxes.
Tax-exempt security: An obligation whose interest is tax-exempt, often called a municipal bond, offered by a country, state, town, or any political district.
Tax free acquisition: A merger or consolidation in which (1) the acquirer's tax basis on each asset whose ownership is transferred in the transaction is generally the same as the acquiree's, and (2) each seller who receives only stock does not have to pay any tax on the gain realized until the shares are sold.
Tax haven: A nation with a moderate level of taxation and/or liberal tax incentives for undertaking specific activities such as exporting or investing.
Tax haven affiliate: A wholly owned entity in a low-tax jurisdiction that is used to channel funds to and from a multinational's foreign operations. The tax benefits of tax haven affiliates were largely removed in the US by the Tax Reform Act of 1986.
Tax holiday: A reduced tax rate that a government provides as an inducement to foreign direct investment.
Tax liability: The amount in taxes a taxpayer to the government.
Tax lien: The right of the government to enforce a claim against the property of a person owing taxes.
Tax and loan account: An account at a private bank, held in the name of the district Federal Reserve Bank, which holds operating cash for the business of the US Treasury.
Tax loss carryback, carryforward: A tax benefit that allows business losses to be used to reduce tax liability in previous and or following years.
Tax-neutrality: Characteristic that taxes do not interfere with the natural flow of capital toward its most productive use.
Tax planning: Devising strategies throughout the year in order to minimize tax liability, for example, by choosing a tax filing status that is most beneficial to the taxpayer.
Tax preference item: Items that must be included when calculating the alternative minimum tax.
Tax preparation services: Firm that prepare tax returns for a fee.
Tax rate: The percentage of tax paid for different levels of income.
Tax Reduction Strategy: A source of competitive advantage that depends on differences in the tax rates imposed in different locations.
Tax Reform Act of 1976: Legislation aimed at tightening provisions relating to taxation, including changes in the capital gains tax laws.
Tax Reform Act of 1984: Legislation enacted as part of the Deficit Reduction Act of 1984 to reduce the federal budget deficit. Among its provisions are a decrease in the minimum holding period for assets to qualify for long-term capital gains treatment from one year to six months.
Tax Reform Act of 1986: A 1986 law involving a major overhaul of the US tax code.
Tax Reform Act of 1993: See: Revenue Reconciliation Act of 1993
Tax refund: Money back from the government when too much tax has been paid or withheld from a salary.
Tax schedules: Tax forms used to report itemized deductions, dividend and interest income, profit or loss from a business, capital gains and losses, supplemental income and loss, and self-employment tax.
Tax selling: Selling of securities to realize losses that will offset capital gains and reduce tax liability. See: Wash sale.
Tax shelter: Legal methods taxpayers can use to reduce tax liabilities. An example is the use of depreciation of assets.
Tax-sheltered annuity: A type of retirement plan under Section 403(b) of the Internal Revenue Code that permits employees of public educational organizations or tax-exempt organizations to make before-tax contributions via a salary reduction agreement to a tax-sheltered retirement plan. Employers are also allowed to make direct contributions on behalf of employees.
Tax shield: The reduction in income taxes that results from taking an allowable deduction from taxable income.
Tax software: Computer software designed to assist taxpayers in filling out tax returns and minimizing tax liability.
Tax status election: The decision of the status under which to file a tax return. For example, a corporation may file as a C corporation or an S corporation.
Tax straddle: Technique used in futures and options trading to create tax benefits. For example, an investor with a capital gain takes a position creating an artificial offsetting loss in the current tax year and postponing a gain from the position until the next tax year.
Tax swap: Swapping two similar bonds to receive a tax benefit.
Tax-timing option: The option to sell an asset and claim a loss for tax purposes or not sell the asset and defer the capital gains tax.
Tax umbrella: Tax loss carryforwards from previous business losses that form a tax shelter for profits earned in current and future years.
Taxpayer Relief Act of 1997: Legislation forming part of a larger act designed to balance the federal budget. Some of the legislation's provisions included tax credits for taxpayers supporting children, an increase in the amount that could be excluded from estate taxes, and a lower capital gains tax rate.
Taxable acquisition: A merger or consolidation that is not a acquisition. The selling shareholders are treated as having sold their shares.
Taxable equivalent yield: The return from a higher-paying but taxable investment that would equal the return from a tax-free investment. This depends on the investor's tax bracket.
Taxable estate: That portion of a deceased person's estate that is subject to transfer tax.
Taxable event: An event or transaction that has a tax consequence, such as the sale of stock holding that is subject to capital gains taxes.
Taxable income: Gross income less a variety of deductions.
Taxable municipal bond: Taxed private-purpose bonds issued by the state or local government to finance prohibited projects such as sports stadiums.
Taxable transaction: Any transaction that is not tax-free to the parties involved, such as a taxable acquisition.
Taxable year: The 12-month period an individual uses to report income for income tax purposes. For most individuals, their tax year is the calendar year.
Tax Equity and Fiscal Responsibility Act of 1983: The law requiring federal income tax withholding on payments of dividend and interest to accounts without a certified tax identification number on file. See: W-9.
Taylor rule: Describes how a central bank should adjust short-term interest rates (e.g. the Federal Funds rate) in response to inflation or output gaps. According to the rule, the interest rate should be increased if inflation rises above the target rate of inflation or if real GDP rises above trend GDP (increasing interest rates would squeeze credit supply to decrease demand and bring prices under control.) On the other hand, if inflation or real GDP fall below their target values, interest rates should be decreased. Proposed by economist John B. Taylor in 1993.
Tear sheet: A page from an S&P stock that provides information on thousands of stocks, often sent to prospective purchasers.
Teaser rate: A low initial interest rate on an adjustable-rate mortgage to entice borrowers, that is later eliminated and replaced by a market-level rate.
Technical analysis: Security analysis that seeks to detect and interpret patterns in past security prices.
Technical analysts: Also called chartists or technicians, analysts who use mechanical rules to detect changes in the supply of and demand for a stock, and to capitalize on the expected change.
Technical condition of a market: Demand and supply factors affecting price, in particular, the net position, either long or short, of the dealer community.
Technical descriptors: Variables that are used to describe the market in terms of patterns in historical data.
Technical forecasting: A forecasting method that uses historical prices and trends.
Technical Information: Information related to the momentum of a particular variable. In market analysis, technical information is information related to market dynamics and crowd behavior only.
Technical insolvency: Default on a legal obligation of the firm. Technical insolvency occurs when a firm doesn't pay a bill on time.
Technical rally: Short rise in securities or commodities futures prices in the face of a general declining trend. Such a rally may result because investors are bargain hunting or because analysts have noticed a particular support level at which securities usually bounce up. Antithesis of correction.
Technical sign: A short-term trend in the price movement of a security that analysts recognize as significant.
Technician: Related: Technical analysts
TED spread: Difference between US Treasury bill rate and Eurodollar rate; used by some traders as a measure of investor/trader anxiety or credit quality.
Teeny: 1/16 or 0.0625 of one full point in price. Steenth.
Tel Aviv Stock Exchange: Israel's only stock exchange.
Telephone switching: Moving one's assets from one mutual fund or variable annuity to another by telephone.
Temporal method: A currency translation method under which the choice of exchange rate depends on the underlying method of valuation. Assets and liabilities valued at historical cost (market cost) are translated at the historical (current market) rate.
Temporary Assets: That portion of a firm's current assets that fluctuates in response to seasonal or anticipated short-term.
Temporary Financing: The sum of negotiated current liabilities and temporary spontaneous current liabilities.
Temporary investment: A short-term investment, such as a money market fund, Treasury bills, or short-term CD, which is usually held a year or less.
Ten largest holdings: The percentage of a portfolio's total net assets or equity holdings in its ten largest securities positions. As this percentage rises, a portfolio's returns are likely to be more volatile because they are more dependent on the fortunes of fewer companies.
Tether: A cryptocurrency known as a stablecoin that is claimed to be collateralized with US dollars.
10% guideline: The standard analysts' principle that funded debt over 10% of the assessed valuation of taxable property for a municipality is excessive.
10-K: Annual report required by the SEC each year. Provides a comprehensive overview of a company's state of business. Must be filed within 90 days after fiscal year-end. A 10-Q report is filed quarterly.
10-Q: Quarterly report required by the SEC each quarter. Provides a comprehensive overview of a company's state of business.
1040 form: The standard individual tax return form of the IRS.
1099: A statement sent to the IRS and taxpayers by the payers of dividends and interest and by issuers of taxable original issue discount securities.
1099 B: The tax statement used for reporting proceeds resulting from the sale, redemption or liquidation of shares.
1099 DIV: The tax statement used for reporting dividends paid to registered shareholders.
Ten-Day Rule: The New York Stock Exchange rule permitting member firms (brokers) to vote in favor of management ten days or less before the meeting, provided that the member firm mailed proxy material to beneficial owners at least 15 business days before the meeting. The rule allows many shares to be voted, which would otherwise not be, to reach a quorum, approve the choice of directors and auditors and handle other routine matters. This rule does not apply to banks, their nominees or their depository positions, nor to non-routine proposals such as approval for the corporation to issue more shares.
Tenant: A partial owner of a security, or the holder of some property. See: Lessee.
Tenants by Entireties (TEN ENT): Joint ownership of property or securities by a husband and wife where, upon the death of one, the property goes to the survivor.
Tenants in common: Account registration in which two or more individuals own a certain proportion of an account. Each tenant's proportion is distributable as part of the owners estate, so that if one of the account holders dies, that owner's heirs are entitled to that proportional share of the account.
Tenbagger: A stock that grows in value ten-fold.
Tender: To offer for delivery against futures.
Tender offer: General offer made publicly and directly to a firm's shareholders to buy their stock at a price well above the current value market price.
Tender offer premium: The premium offered above the current market price in a tender offer.
Tenor: The length of time until a loan is due. For example, a loan is taken out with a two year tenor. After one year passes, the tenor of the loan is one year.
Term: The period of time during which a contract is in force.
Term Asset-Backed Securities Loan Facility (TALF): A program announced by the Federal Reserve Bank in November 2008 to make loans to firms that would be purchasing high quality asset backed securities such as credit cards, student loans and some Small Business Administration loans.
Term Auction Facility (TAF): TAF was created by the Federal Reserve in December 2007 as bank funding markets got strained during the 2007 financial crisis. Access to 28 and 84 day funding were given to deposit-taking institutions and the program was open to all banks with access to the primary discount window. The last TAF auction was held March 8, 2010.
Term bonds: Bonds whose principal is payable at maturity. Often referred to as bullet-maturity bonds or simply bullet bonds. Related: Serial bonds.
Term certificate: A certificate of deposit with a longer time to maturity.
Term Fed funds: Fed funds sold for a period of time longer than overnight.
Term insurance: Provides a death benefit only, no build up of cash value.
Term life insurance: A contract that provides a death benefit but no cash build up or investment component. The premium remains constant only for a specified term of years, and the policy is usually renewable at the end of each term.
Term loan: A bank loan, typically with a floating interest rate, for a specified amount that matures in between one and ten years, and requires a specified repayment schedule.
Term to maturity: The time remaining on a bond's life, or the date on which the debt will cease to exist and the borrower will have completely paid off the amount borrowed. See: Maturity.
Term premiums: Excess of the yields to maturity on long-term bonds over those of short-term bonds.
Term repo: A repurchase agreement with a term of more than one day.
Term repurchase: A repurchase agreement with a term of more than one day. Also known as Term repo
Term Securities Lending Facility (TSLF): Announced by the Federal Reserve on March 11, 2008, the TSLF loaned Treasury securities to certain investment banks for one month in return for pledged collateral. The program was aimed at boosting confidence in those firms. The facility was closed on Feb. 1, 2010.
Term structure of interest rates: Relationship between interest rates on bonds of different maturities, usually depicted in the form of a graph often called a yield curve. Harvey shows that inverted term structures (long rates below short rates) have preceded every recession over the past 30 years.
Term trust: A closed-end fund that has a fixed termination or maturity date.
Terminal value: The value of a bond at maturity, typically its par value, or the value of an asset (or an entire firm) on some specified future valuation date. Usually, a perpetuity formula is used. For example, suppose we forecast cash flows through year 10. We make an assumption that year 11 and beyond will be no growth (except for inflation). If the cash flow forecast for year 11 is 100, the firm's discount rate is 12%, and inflation is expected to be 2%, we use the formula V₁₀ = CF₁₁/(disc rate-inflation). Hence, the value is 100/(0.12 - 0.02) that is 1,000. This cash flow needs to be brought back to present value using the formula 1000/(1.12)¹⁰, which is 321.97. Note the importance of the inflation assumption.
Terms of Delivery: The part of a sales contract that indicates the point at which title and risk of loss of merchandise pass from the seller to the buyer. See: Incoterms.
Terms of sale: Conditions under which a firm proposes to sell its goods or services for cash or credit.
Terms of trade: The weighted average of a nation's export prices relative to its import prices.
Territorial tax system: A tax system that taxes domestic income but not foreign income. Territorial tax regimes are found in Hong Kong, France, Belgium, and the Netherlands.
Test: The event of a price movement that approaches a support level or a resistance level established earlier by the market. A test is passed if prices do not go below the support or resistance level, and the test is failed if prices go on to new lows or highs.
Testamentary trust: A trust created by a will, that is scheduled to occur after the maker's death.
The Desk: The trading desk at the Federal REserve Bank of New York through which open market purchases and sales of government and federal agancy securities are made. The desk maintains direct telephone communication with major government securities dealers. A "foreign desk" at the Federal Reserve Bank of New York conducts transactions in the foregin exchange market.
Theoretical futures price: The equilibrium futures price. Also called the fair price.
Theoretical spot rate curve: A curve derived from theoretical considerations as applied to the yields of actually traded Treasury debt securities, because there are no zero-coupon Treasury debt issues with a maturity greater than one year. Like the yield curve, this is a graphic depiction of the term structure of interest rates.
Theoretical value: Applies to derivative products. Mathematically determined value of a derivative instrument as dictated by a pricing model such as the Black-Scholes model.
Theta: The ratio of the change in an option price to the decrease in time to expiration. Also called time decay.
Thin market: A market in which trading volume is low, and consequently bid and asked quotes are wide and the instrument traded is not very liquid. Very little stock to buy or sell.
Thinly traded: Infrequently traded.
Third market: Exchange-listed securities trading in the OTC market.
Thirty-day visible supply: The total volume in dollars of municipal bonds with maturities of 13 months or more that should reach the market within 30 days.
Thirty-day wash rule: IRS rule stating that losses on a sale of stock may not be used as tax shelter if equivalent stock is purchased 30 days or less before or after the sale of the stock.
Thirty/Three Sixty (30/360): Day count convention for calculating interest accrued on corporate bonds, municipal bonds, and agency bonds in the U.S. Uses 30 days in a month and 360 days in a year for calculating interest payments. Also see Day count convention.
Three-phase DDM: A version of the dividend discount model that applies a different expected dividend rate depending on a company's life-cycle phase: growth phase, transition phase, or maturity phase.
Three steps and a stumble rule: A rule predicting that stock and bond prices will fall following three increases in the discount rate by the Federal Reserve. This is a result of increased costs of borrowing for companies and the increased attractiveness of money market funds and CDs over stocks and bonds as a result of the higher interest rates.
Threshold for refinancing: The point when the weighted-average coupon of an MBS is at a level to induce homeowners to prepay the mortgage in order to refinance to a lower-rate mortgage, generally reached when the weighted-average coupon of the MBS is 2 percentage points or more above currently available mortgage rates.
Thrift institution: An organization formed as a depository for primarily consumer savings. Savings and loan associations and savings banks are thrift institutions.
Thrift Institution Advisory Council (TIAC): A council, established following the passage of the Monetary Control Act of 1980, whose purpose is to provide information and views on the special needs and problems of thrifts. The group is comprised of representatives of savings banks, savings and loan associations, and creditor unions.
Thrift plan: A defined contribution plan in which an employee contributes, usually on a before-tax basis, toward the ultimate benefits that will be provided. The employer usually agrees to match all or a portion of the employee's contributions.
Thrift savings plan: A defined contribution plan for civil service employees, retirees, and for members of the uniformed services of the United States. TSP is similar to 401(K) plan offered in the private sector.
Throughput agreement: An agreement to put a specified amount of product per period through a particular facility. An example is an agreement to ship a specified amount of crude oil per period through a particular pipeline.
Tick: Refers to the minimum change in price a security can have, either up or down. Related: Point.
Tick indicator: A market indicator based on the number of stocks whose last trade was an uptick or a downtick. Used as an indicator of market sentiment or psychology to try to predict the market's trend.
Tick-test rules: SEC-imposed restrictions on when a short sale may be executed, intended to prevent investors from destabilizing the price of a stock when the market price is falling. A short sale can be made only when either (1) the sale price of the particular stock is higher than the last trade price (referred to as an uptick trade) or (2) if there is no change in the last trade price of the particular stock, the previous trade price must be higher than the trade price that preceded it (referred to as a zero uptick).
Ticker symbol: An abbreviation assigned to a security for trading purposes.
Ticker tape: Computerized device that relays to investors around the world the stock symbol and the latest price and volume on securities as they are traded.
Ticket: An abbreviation of order ticket.
Tier 1 and Tier 2: Descriptions of the capital adequacy of banks. Tier 1 refers to core capital while Tier 2 refers to items such as undisclosed resources.
Tight: In line with or extremely close to the inside market or last sale in a stock (+/- 1/8). On the money.
Tight market: A market in which volume is high, trading is active and highly competitive, and consequently spreads between bid and ask prices are narrow.
Tight money: When a restricted money supply makes credit difficult to secure. The antithesis of tight money is easy money.
Tiki: Tick of Dow Jones Industrial Average component issues.
Tilted portfolio: An indexing strategyy that is linked to active management through the emphasis of a particular industry sector, selected performance factors such as earnings momentum, dividend yield, price-earnings ratio, or selected economic factors such as interest rates and inflation.
Time decay: Related: Theta
Time deposit: Interest-bearing deposit at a savings institution that has a specific maturity. Related: Certificate of deposit.
Time draft: Demand for payment at a stated future date.
Time horizon: The period, usually expressed in years, for which an investor expects to hold an investment.
Time Letter of Credit: See: Usance Letter of Credit.
Time to maturity: The time remaining until a financial contract expires. Also called time until expiration.
Time order: Order that becomes a market or limited price order or is canceled at a specific time.
Time premium: Also called time value, the amount by which an option price exceeds its intrinsic value. The value of an option beyond its current exercise value representing the optionholder's control until expiration, the risk of the underlying asset, and the riskless return.
Time-series analysis: Assessment of relationships between two or among more variables over periods of time.
Time series models: Systems that examine series of historical data; sometimes used as a means of technical forecasting, by examining moving averages.
Time spread strategy: Buying and selling puts and calls with the same exercise price but different expiration dates, and trying to profit from the different premiums of the options.
Time until expiration: The time remaining until a financial contract expires. Also called time to maturity.
Time value: Applies to derivative products. Portion of an option price that is in excess of the intrinsic value, due to the amount of volatility in the stock; sometime referred to as premium. Time value is positively related to the length of time remaining until expiration.
Time value of money: The idea that a dollar today is worth more than a dollar in the future, because the dollar received today can earn interest up until the time the future dollar is received.
Time value of an option: The portion of an option's premium that is based on the amount of time remaining until the expiration date of the option contract, and the idea that the underlying components that determine the value of the option may change during that time. Time value is generally equal to the difference between the premium and the intrinsic value. Related: In the money.
Time value permium: The amount by which an option's total premium exceeds its intrinsic value.
Times-interest-earned ratio: Earnings before interest and tax, divided by interest payments.
Time-weighted rate of return: Related: Geometric mean return
Time-Zone Arbitrage: A form of stale price arbitrage where the pricing discrepencies are due to the primary markets for the underlying securities being closed at the times that the fund is traded. Note that time zone arbitrage is sometimes mistakenly used if it were a pure synonym for stale price arbitrage. These are not synonyms since stale prices can also be due to illiquid stocks or bonds that are not traded frequently.
Timeliness: A source of competitive advantage that depends on being the first to enter a given market with a product or service.
Timing: See: Market timing
Timing option: The seller's choice of when in the delivery month to deliver. A Treasury Bond or note futures contract.
Tip: Information given by one trader to another, which is used in making buy or sell decisions but is not available to the general public.
Tired: Has been strong for a while and will probably fall due to increased supply at current price level (due to e.g. profit taking, technical analysis). Heavy.
Title insurance: Insurance policy that protects a policyholder from future challenges to the title claim a property that may result in loss of the property.
To be announced (TBA): A contract for the purchase or sale of an MBS to be delivered at an agreed-upon future date but does not include a specified pool number and number of pools or precise amount to be delivered.
Tobin's Q: Market value of assets divided by replacement value of assets. A Tobin's Q ratio greater than 1 indicates the firm has done well with its investment decisions. Named after James Tobin, Yale University economist.
Toehold purchase: Often used in risk arbitrage. Accumulation by an acquirer of less than 5% of the shares of a target company. Once 5% is acquired, the acquirer must file with the SEC and other agencies to explain its intentions and notify the acquiree. See: Rule 13d.
Tokyo Commodity Exchange (TOCOM): Tokyo exchange for trading futures on gold, silver, platinum, palladium, rubber, cotton yarn, and woolen yarn.
Tokyo International Financial Futures Exchange: Exchange that trades Euroyen futures and options, and futures on the one-year Euroyen, three-month eurodollar, and US dollar/Japanese yen currency.
Tokyo Stock Exchange (TSE): The largest stock exchange in Japan with the some of the most active trading in the world.
Toll revenue bond: A municipal bond that is repaid with revenues from tolls that are paid by users of the public project built with the bond revenue.
Tolling agreement: An agreement to put a specified amount of raw material per period through a particular processing facility. For example, an agreement to process a specified amount of alumina into aluminum at a particular aluminum plant.
Tom next: Means to "tomorrow next". In the interbank market in Eurodollar deposits and the foreign exchange market, the value (delivery) date on a tom next transaction is the next business day.
Tombstone: Advertisement listing the underwriters of a security issue.
Ton: $100 million in bond trader's terms.
too-big-too-fail: Government practices that protect large banking organizations from the normal discipline of the marketplace because of concerns that such institutions are so important to markets and their positions so intertwined with those of other banks that their failure would be unaccrptably disruptive, financially and economically.
Top: Indicates the higher price one is willing to pay for a stock in an order; implies a not held order.
Top-down approach: A method of security selection that starts with asset allocation and works systematically through sector and industry allocation to individual security selection.
Top-down equity management style: Investment style that begins with an assessment of the overall economic environment and makes a general asset allocation decision regarding various sectors of the financial markets and various industries. The bottom-up manager, in contrast, selects specific securities within the particular sectors.
Top-heavy: At a price level where supply is exceeding demand. See: Resistance level.
Topline growth: Growth in revenues. Refers to overall growth rather than segment growth. Also see: Bottomline growth.
Topline performance: Usually refers to overall earnings for a corporation (as opposed to earnings by segment).
Topping out: Denoting a market or a security that is at the end of a period of rising prices and can now be expected to stay on a plateau or even to decline.
Toronto Stock Exchange (TSX): Canada's largest stock exchange which was founded in 1861, the trading floor closed in 1997 and it became a completely electronic exchange. As of 2000, the TSX became a private company. In 2001, the TSX acquired the Canadian Venture Exchange which was renamed the TSX Venture Exchange. The average stock price is represented by the S&P/TSX Composite Index (which replaced the TSE 300 on May 1, 2002).
Total: Complete amount of buy or sell interest, as opposed to having more behind it. See: Partial.
Total asset turnover: The ratio of net sales to total assets.
Total capitalization: The total long-term debt and all types of equity of a company that constitutes its capital structure.
Total cost: The price paid for a security plus the broker's commission and any accrued interest that is owed to the seller (in the case of a bond).
Total debt-to-equity ratio: A capitalization ratio comparing current liabilities plus long-term debt to shareholders' equity.
Total dollar return: The dollar return on a nondollar investment, which includes the sum of any dividend/interest income, capital gains or losses, and currency gains or losses on the investment. See also: Total return.
Total Market Capitalization: The total market value of all of a firm's outstanding securities.
Total return: In performance measurement, the actual rate of return realized over some evaluation period. In fixed income analysis, the potential return that considers all three sources of return (coupon interest, interest on coupon interest, and any capital gain/loss) over some investment horizon.
Total return for calendar year: The profit or loss realized by an investment at the end of a specified calendar year, stated as the percentage gained or lost per dollar invested on January 1.
Total revenue: Total sales and other revenue for the period shown. Known as "turnover" in the U.K.
Total risk: The sum of systematic and unsystematic risk.
Total volume: The total number of shares or contracts traded on national and regional exchanges in a stock, bond, commodity, future, or option on a certain day.
Touch, the: Mainly applies to international equities. Inside market in London terminology.
Tough on price: Firm price mentality at which one wishes to transact stock, often at a discount/premium that is not available at the time.
Tout: To promote a security in order to attract buyers.
Toxic assets: In the context of the 2007-2009 recession, the term refers to assets like mortgage backed securities and collateralized debt obligations that are illiquid and difficult to value. If the value of the underlying assets falls significantly, these securities could lose value rapidly (aggravated by the lack of liquidity and transparency in price) which could lead to significant write-downs (and hence losses) for holders of these toxic assets.
Toxic Convertible: Used by companies that are in such bad shape, that there is no other way to get financing. This instrument is similar to a convertible bond, but convertible at a discount to the share price at issuance and for a fixed dollar amount rather than a specific number of shares. The further the stock falls, the more shares you get. Popular in the mid to late 1990s. Also known as death spiral convertibles or floorless convertibles.
Tracers: Refers to investment trusts which are populated by corporate bonds. In October 2001, Morgan Stanley's Tradable Custodial Receipts (Tracers) was launched. Tracers contain a number of coporate bonds and credit default swaps which are selected for liquidity and diversity. Lehman Brothers launched a similar product, Targeted Return Index Securities (Trains) in January 2002. Both contain investment grade bonds. If a bond falls out of the investment grade category, it is either liquidated from the trust or delivered to the investor. Both Tracers and Trains are 144a trust structures and are only available to qualified buyers because they are considered private securities due to the trust structure.
Tracker Mortgage: A type of mortgage for which the interest rate tracks Bank of England’s interest rate.
Tracking error: In an indexing strategy, the standard deviation of the difference between the performance of the benchmark and the replicating portfolio.
Tracking stock: Best defined with an example. Suppose Company A purchases a business from Company B and pays B with 1 million shares of A's stock. The agreement provides that B cannot sell the 1 million shares for 60 days, and also prohibits B from hedging by purchasing put options on A's shares or short-selling A's shares. B is worried that the market may fall in the next 60 days. B could hedge by purchasing put options or selling the futures on the S&P 500. However, it is possible that A's business is much more cyclical than the S&P 500. One solution to this problem is to find a tracking stock. This is a stock that has high correlation with A. Let us call it Company C. The solution is to sell short or buy protective put options on this tracking stock C. This protects B from fluctuations in the price of A's stock over the next 60 days. Because the degree of the protection is related to the correlation of A and C's stock, it is extremely unlikely that the protection is perfect. Multidivisional firms have used a form of restructuring called tracking stock since 1984 to segment the performance of a particular division -- similar to a spin-off or carve-out, except that the parent firm does not relinquish control of the tracked division. Previously, this was known as alphabet stock, but the technically correct name is tracking stock (e.g., EDS traded for years as a tracking stock of GM). This is a way to reward managers for good divisional performance with an equity that is tied to their division-rather than potentially penalizing them compensation for bad performance in a division they have no control over.
Trade: An oral (or electronic) transaction involving one party buying a security from another party. Once a trade is consummated, it is considered "done" or final. Settlement occurs 1-5 business days later.
Trade acceptance: Written demand that has been accepted by an industrial company to pay a given sum at a future date. Related: Banker's acceptance.
Trade away: Trade execution by another broker/dealer.
Trade balance: Overall result of a country's exports.
Trade credit: Credit one firm grants to another firm for the purchase of goods or services. That is, when the goods are delivered, the recipient does not have to pay immediately for the goods - a credit is given with terms for payment (say 30 days). This potentially allows the vendor to sell the goods and use the sale proceeds payoff the credit obligation.
Trade date: The date that the counterparties in an interest rate swap commit to the swap. Also, the day on which a security or a commodity future trade actually takes place. Trades generally settle (are paid for) 1-5 business days after a trade date. With stocks, settlement is generally 3 business days after the trade. The settlement date usually follows the trade date by five business days, but varies depending on the transaction and method of delivery used.
Trade debt: Accounts payable.
Trade deficit or surplus: The difference in the value of a nation's imports over exports (deficit) or exports over imports (surplus).
Trade draft: A draft addressed to a commercial enterprise. See: Draft.
Trade finance: Usually refers to financial transactions involving the exports and imports. This could involve payment facilities, downpayments, hedging, guarantees, and transportation linked issues.
Trade flat: For convertibles, trade without accrued interest. Preferred stock always "trades flat," as do bonds on which interest is in default or is in doubt. In general, trade in and out of a position at the same price, neither making a profit nor taking a loss.
Trade house: A firm that deals in actual commodities.
Trade Lanes: The direction of trade, e.g. US to Europe.
"Trade me out": Work out of one's long position (usually created by committing firm principal to complete a trade block trade) by selling stock. Antithesis of "buy them back."
Trade on the wire: Immediately give a bid or offer to a salesperson without checking the floor conditions (listed), dealer depth (OTC) or customer interest. An aggressive trading posture.
Trade on top of: Trade at a narrow speed or no spread in basis points relative to some other bond yield, usually Treasury bonds.
Trade reporting: Dealer: In a trade between two registered Market Participants (MP), only the sell side reports the trade. Auction: In a trade between two member firms, only the sell side reports the trade. Dealer: In a trade between a registered MP and a non-registered MP (Market Maker not registered in a particular stock, an ECN, etc.), the registered MP reports the trade as a buy or sell. Auction: Trading can occur ONLY between two member firms. (Thus, a buy is never reported.)
Trade Surplus: A nation's excess of exports over imports during a given time frame.
Trade-weight value of the dollar: The value of the dollar pegged to, a market basket of selected foreign currencies. The Federal Reserve calculates a trade-weighted value of the dollar based on the weighted-average exchange value of the dollar against the currencies of 10 industrial countries.
Trademark: A distinctive name or symbol used to identify a product or company and build recognition. Trademarks may be registered with the US Patent and Trademark Office.
Traders: Individuals who take positions in securities and their derivatives with the objective of making profits. Traders can make markets by trading the flow. When they do this, their objective is to earn the bid/ask spread. Traders can also take proprietary positions in which they seek to profit from the directional movement of prices or spread positions.
Trades by appointment: A stock that is very difficult to trade to because of illiquidity.
Trading: Buying and selling securities.
Trading Ahead: A New York Stock Exchange rule violation. Basically, in this situation the specialist puts their firm's interest ahead of the investor's interest. Consider an example. Suppose that the specialist simultaneously receives orders from two investors, one to sell 5,000 shares of XYZ and one to buy 5,000 shares of XYZ. Normally, these orders are matched. However, suppose that the specialist substitutes (matches) her own firm's 5,000 shares of XYZ. That is, the firm's own shares are sold instead of the order that came in previously. This disadvantages the buyer because the very next transaction will be the order to sell 5,000 shares of XYZ (which will likely put downward pressure on the price). Notice that the firm has bailed out of XYZ at a higher price than if the order was reversed (the specialist's firm selling afterwards). Trading ahead is part of what is known as negative obligation. Trading ahead should not be confused with front_running.
Trading authorization: A document (power of attorney) a customer gives to a broker in order that the broker may buy and sell securities on behalf of the customer.
Trading costs: Costs of buying and selling marketable securities and borrowing. Trading costs include commissions, slippage, and the bid/ask spread. See: Transactions costs.
Trading desk (dealing desk): Personnel at an international bank who trade spot and forward foreign exchange.
Trading dividends: Maximizing a firm's revenues by purchasing stock in other firms in order to collect the maximum amount of dividends of which 70% is tax-free.
Trading halt: When trading of a stock, bond, option or futures contract is stopped by an exchange while news is being broadcast about the security. See: Suspended trading.
Trading limit: The exchange-imposed maximum daliy price change that a futures contract or futures option contract can undergo.
Trading paper: CDs purchased by accounts that are likely to resell them. The term is commonly used in the Euromarket.
Trading pattern: Long-range direction of a security or commodity futures price, charted by drawing one line connecting the highest prices the security has reached and another line connecting the lowest prices at which the security has traded over the same period. See: Technical analysis.
Trading posts: The positions on the floor of a stock exchange where the specialists stand and securities are traded.
Trading price: The price at which a security is currently selling.
Trading profit: The profit earned on short-term trades of securities held for less than one year, subject to tax at normal income tax rates.
Trading range: The difference between the high and low prices traded during a period of time; for commodities, the high/low price limit an exchange establishes for a specific commodity for any one day's trading.
Trading securities: Investment in securities with the intention of selling them in the short term for a profit. These are reported at market value. Unrealized gains or losses on these investments appear in the Net Income for the period. Also see Available for Sale, Held to Maturity.
Trading strategy: A disciplined method of buying and selling assets that involves working within a predefined set of rules for making trading decisions. Examples are the covered position, CPPI, index arbitrage and multirule system.
Trading symbol: See: Ticker symbol
Trading unit: The number of shares of a particular security that is used as the acceptable quantity for trading on the exchanges.
Trading variation: The increments to which securities prices are rounded up or rounded down.
Trading volume: The number of shares transacted every day. As there is a seller for every buyer, one can think of the trading volume as half of the number of shares transacted. That is, if A sells 100 shares to B, the volume is 100 shares.
Traditional IRA: A tax-deferred individual retirement account that allows annual contributions of up to $2000 for each income earner. Contributions are fully deductible for all individuals who are not active participants in employer-sponsored plans or for plan participants within certain income ranges.
Traditional view (of dividend policy): An argument that, "within reason," investors prefer higher dividends to lower dividends because the dividend is sure but future capital gains are uncertain.
Trailing earnings: Past earnings. Often used in the context of the price earnings ratio. This ratio is usually distinguished as price to trailing earnings (today's price divided by the most recent 12 months of earnings) versus price to prospective earnings (today's price divided by consensus forecast earnings for the next 12 months).
Trailing returns: Past returns of a fund or a company over a given time period.
Trailing sales: Past sales. Often used in the valuation of companies that have negative cash flows or earnings. The company is said to be valued at some multiple of past sales - usually, the last 12 months sales.
Trains: Refers to investment trusts which are populated by corporate bonds. In October 2001, Morgan Stanley's Tradable Custodial Receipts (Tracers) was launched. Tracers contain a number of coporate bonds and credit default swaps which are selected for liquidity and diversity. Lehman Brothers launched a similar product, Targeted Return Index Securities (Trains) in January 2002. Both contain investment grade bonds. If a bond falls out of the investment grade category, it is either liquidated from the trust or delivered to the investor. Both Tracers and Trains are 144a trust structures and are only available to qualified buyers because they are considered private securities due to the trust structure.
Tranche: One of several related securities offered at the same time. Tranches from the same offering usually have different risk, reward, and/or maturity characteristics.
Transaction: The delivery of a security by a seller and its acceptance by the buyer.
Transaction account: A checking or similar account from which transfers can be made to third parties. Demand-deposit accounts, negotiable order of withdrawal NOW accounts, automatic transfer service (ATS) accounts, and credit union share draft accounts are examples of transaction accounts at banks and other depository institutions.
Transactions costs: The time, effort, and money necessary, including such things as commission fees and the cost of physically moving the asset from seller to buyer. Transcations costs should also include the bid/ask spread as well as price impact costs (for example a large sell order could lower the price). Related: Round-trip transactions costs, information costs, search costs.
Transaction demand (for money): The money needed to accommodate a firm's expected cash transactions.
Transaction exposure: Risk to a firm with known future cash flows in a foreign currency, that arises from possible changes in the exchange rate. Related: Translation exposure.
Transaction fee: A charge an intermediary, such as a broker-dealer or a bank, assesses for assisting in the sale or purchase of a security.
Transaction Insured Trade Acceptance Locator (TITAL): A trade acceptance through an insurance entity (rather than a bank) which is conditional upon exporter performance.
Transaction loan: A loan extended by a bank for a specific purpose. Lines of credit and revolving credit agreements involve by contrast loans that can be used for various purposes.
Transaction tax: Applies mainly to international equities. Levies on a deal that foreign governments sometimes charge.
Transaction risk: The risk of changes in the home currency value of a specific future foreign currency cash flow.
Transactions motive: A desire to hold cash in order to conduct cash-based transactions.
Transcript of Account: A listing of all prior and present registered securityholder account information.
Transfer: A change of ownership from one person or party to another.
Transfer agent: Individual or institution a company appoints to look after the transfer of securities.
Transfer On Death (TOD): The process of changing title of a security from one name to another upon the death of one of the titleholders.
Transfer payments: Payments from a government to its citizens, such as welfare and other government benefits.
Transfer price: The price at which one unit of a firm sells goods or services to another unit of the same firm.
Transfer risk: The risk associated with the possibility of a currency not being able to be sent out of the country, usually due to central bank restrictions or a national debt rescheduling.
Transfer tax: A small federal tax on the movement of ownership of all bonds (except obligation of the US, foreign governments, states, and municipalities) and all stocks.
Transferable letter of credit: Document that allows the first beneficiary on a standby bank assurance of funds to transfer all or part of the original letter of credit to a third party.
Transferable Stock Options: Options that provide by their terms that they may be transferred by the optionee, generally only to a family member or to a trust, limited partnership or other entity for the benefit of family members, or to a charity.
Transferable put right: An option issued by a firm to its shareholders to sell the firm one share of its common stock at a fixed price (the strike price) within a stated period (the time to maturity). The put right is "transferable" because it can be traded in the capital markets.
Transferee: The party who has received the benefits of a letter of credit by action of a transfer.
Transferor: The beneficiary of a transferable letter of credit who causes a bank to transfer the credit to another party.
Transshipment: The passing goods from one ocean vessel to another.
Transition phase: A stage of development when a company begins to mature and its earnings decelerate to the rate of growth of the economy as a whole. Related: Three-phase DDM.
Translation exposure: Risk of adverse effects on a firm's financial statements that may arise from changes in exchange rates. Related: Transaction exposure.
Translation Risk: The risk of changes in the reported home currency accounting results of foreign operations due to changes in currency exchange rates.
Transmittal letter: A letter describing the contents and purpose of a transaction delivered with a security that is changing ownership.
Travel and entertainment expense: Funds spent on business travel and entertainment that qualify for a tax deduction of 50% of the amount claimed.
Treasurer: The corporate officer responsible for designing and implementing a firm's financing and investing activities.
Treasurer's check: A check issued by a bank to make a payment. Treasurer's checks outstanding are counted as part of a bank's reservable deposits and as part of the money supply.
Treasuries: Related: Treasury securities
Treasury: US Department of the Treasury, which issues all Treasury bonds, notes, and bills as well as overseeing agencies. Also, the department within a corporation that oversees its financial operations including the issuance of new shares.
Treasury bills: Debt obligations of the US Treasury that have maturities of one year or less. Maturities for T-bills are usually 91 days, 182 days, or 52 weeks. Treasury bills are sold at a discount from face value and do not pay interest before maturity. The interest is the difference between the purchase price of the bill and the amount that is paid to you either at maturity (this amount is the face value) or when you sell the bill prior to maturity.
Treasury bonds: Debt obligations of the US Treasury that have maturities of more than 10 years.
Treasury Borrowing Advisory Committee: Also, known as TBAC or the "Borrowing Committee" of The Securities Industry and Financial Markets Association (SIFMA) is an advisory committee governed by federal statute that meets quarterly with the Treasury Department. The Borrowing Committee�s membership is comprised of senior representatives from investment funds and banks. The Borrowing Committee presents their observations to the Treasury Department on the overall strength of the U.S. economy as well as providing recommendations on a variety of technical debt management issues - such as the maturity structure of new bond offerings. The Securities Industry and Financial Markets Association does not participate in the deliberations of the Borrowing Committee.
Treasury certificates: From 1963 to 1975, the Treasury issued something called a "Treasury Certificates". It was a nonmarketable, public issue with a short maturity, usually three months and never more than a one year. They were issued once or twice every month with odd interest rates (such as 5.471% and 6.053%) and sold at par.
Treasury convenience yield: The value investors assign to the liquidity and safety attributes offered by Treasuries.
Treasury direct: A system allowing an individual investor to make a noncompetitive bid on US Treasury securities and thus avoid broker-dealer fees.
Treasury Inflation-Indexed Securities (TIIS): Refers to a broad range of U.S. Treasury securities that are inflation indexed. The most popular are the TIPS. The index for measuring the inflation rate is the non-seasonally adjusted U.S. City Average All Items Consumer Price Index for All Urban Consumers (CPI-U), published monthly by the Bureau of Labor Statistics (BLS).
Treasury Inflation-Protected Security (TIPS): First issued by the U.S. Treasury in 1997, these Treasury bonds attempt to protect investors against fluctuations in inflation by linking the principal amount to the consumer price index. Each year, the principal is adjusted by the inflation rate during the previous year. The index for measuring the inflation rate is the non-seasonally adjusted U.S. City Average All Items Consumer Price Index for All Urban Consumers (CPI-U), published monthly by the Bureau of Labor Statistics (BLS). These bonds are taxable. Indeed, one must pay tax on both the interest and the increase in principal. TIPS are one of two types of inflation-indexed securities sold by the U.S. Treasury; the other type is Series I Savings Bonds.
Treasury Investors Growth Receipt (TIGER): US government-backed bonds without coupons, meaning that the bondholders do not receive the periodic interest payments. The principal of the bond and the individual coupons are sold separately.
Treasury management: Refers to the part of the corporation that in charge of obtaining, maintaining, servicing the company or organization's loans, lines of credit, hedging operations, and other capital raising activities. Treasury would also interact with rating agencies. Sometimes called Treasury Operations.
Treasury notes: Debt obligations of the US Treasury that have maturities of more than one year, but not more than 10 years.
Treasury operations: Refers to the part of the corporation that in charge of obtaining, maintaining, servicing the company or organization's loans, lines of credit, hedging operations, and other capital raising activities. Treasury would also interact with rating agencies. Sometimes called Treasury Management.
Treasury securities: Securities issued by the US Department of the Treasury.
Treasury Shares: Shares issued in the name of the corporation. The shares are considered issued, but not outstanding.Usually refers to stock that was once traded in the market but has since been repurchased by the corporation. Treasury stock not considered when calculating dividends or earnings per share.
Treasury stock: Common stock that has been repurchased by the company and held in the company's treasury.
Treat me subject: In the equities market, a conditional bid or offer. "My bid or offer is not firm, but is subject to confirmation between other parties and to market changes."
Trecentillion: A unit of quantity equal to 10⁹⁰³ (1 followed by 903 zeros).
Tredecillion: A unit of quantity equal to 10⁴² (1 followed by 42 zeros).
Trenonagintillion: A unit of quantity equal to 10²⁸² (1 followed by 282 zeros).
Treoctogintillion: A unit of quantity equal to 10²⁵² (1 followed by 252 zeros).
Trequadragintillion: A unit of quantity equal to 10¹³² (1 followed by 132 zeros).
Trequinquagintillion: A unit of quantity equal to 10¹⁶² (1 followed by 162 zeros).
Treseptuagintillion: A unit of quantity equal to 10²²² (1 followed by 222 zeros).
Tresexagintillion: A unit of quantity equal to 10¹⁹² (1 followed by 192 zeros).
Tretrigintillion: A unit of quantity equal to 10¹⁰² (1 followed by 102 zeros).
Trevigintillion: A unit of quantity equal to 10⁷² (1 followed by 72 zeros).
Trend: The general direction of the market.
Trend following: A trading method that makes trading decisions through the use of computer models that determine the general direction of the market. Most of these models are based on momentum and that is why they are called trend following.
Trend Ratio Analysis: The comparison of the successive values of each ratio for a single firm over a number of years.
Trendline: A technical chart line that depicts the past movement of a security and that is used in an attempt to help predict future price movements.
Treynor Index: A measure of the excess return per unit of risk, where excess return is defined as the difference between the portfolio's return and the risk-free rate of return over the same evaluation period and where the unit of risk is the portfolio's beta. Named after Jack Treynor.
T-Rex Fund: A large venture capital fund (over one billion dollars). Such funds are known for imposing strong discipline on the firms they fund.
Trial balance: Prepared at the close of an accounting period, it is a record of general ledger account titles with their respective debit and credit balances.
Triangular arbitrage: Striking offsetting deals among three markets simultaneously to obtain an arbitrage profit.
Trickle down: An economic theory that the support of businesses that allows them to flourish will eventually benefit middle- and lower-income people, in the form of increased economic activity and reduced unemployment.
Trigintillion: A unit of quantity equal to 10⁹³ (1 followed by 93 zeros).
TRIN: Name derived from TRading INdex. Also known as an ARMS index. The index is usually calculated as the number of advancing issues divided by the number of declining issues. This, in turn, is divided by the advancing volume divided by the declining volume. If there is considerably more advancing volume relative to declining volume this will tend to reduce the index (i.e. increase the denominator). Hence, a value less than 1.0 is bullish while values greater than 1.0 indicate bearish demand. The index often is smoothed with a simple moving average.
Triple net lease: A lease providing that the tenant pay for all maintenance expenses, plus utilities, taxes, and insurance. This results in lower risk for investors, who usually form a limited partnership.
Triple tax-exempt: Municipal bonds featuring federal, state, and local tax-free interest payments.
Triple witching hour: The four times a year that the S&P futures contract expires at the same time as the S&P 100 index option contract and option contracts on individual stocks. It is the last trading hour on the third Friday of March, June, September, and December, when stock options, futures on stock indexes, and options on these futures expire concurrently. Massive trades in index futures, options, and underlying stock by hedge strategists and arbitrageurs cause abnormal activity (noise) and volatility.
Trough: The transition point between economic recession and recovery.
Troubled assets: In context of the Troubled Asset Relief Program, the term “troubled asset” is defined as:
(A) Mortgages, mortgage backed securities, and instruments derived from these that were originated on or before March 14, 2008, and
(B) Any other financial instrument the purchase of which is necessary to promote financial market stability.
Troubled Asset Relief Program (TARP): A $700 billion fund created in response to the credit crunch that hit the US in 2008. The original intent of the fund was to allow the Treasury to buy illiquid mortgage-related assets. The fund was ultimately used to provide direct capital infusions to distressed financial institutions.
True interest cost: For a security such as commercial paper that is sold on a discount basis, true interest cost is the coupon rate required to provide an identical return assuming a coupon-bearing instrument of like maturity that pays interest in arrears.
True lease: A contract that qualifies as a valid lease agreement under the Internal Revenue Code.
Trust: A fiduciary relationship calling for a trustee to hold the title to assets for the benefit of the beneficiary. The person creating the trust, who may or may not also be the beneficiary, is called the grantor.
Trust company: An organization that acts as a fiduciary and administers trusts.
Trust deed: Agreement between trustee and borrower setting out terms of a bond.
Trust fund transaction: An intra budgetary financial arrangement in which both payments and receipts occur within the same trust fund group.
Trust Indenture Act of 1939: A law that requires all corporate bonds and other debt securities to be issued subject to indenture agreements and comply with certain indenture provisions approved by the SEC.
Trust receipt: Receipt for goods that are to be held in trust for the lender.
Trustee: Agent of a bond issuer who handles the administrative aspects of a loan and ensures that the borrower complies with the terms of the bond indenture.
Trustee in bankruptcy: An appointed trustee who supervises and administers the affairs of a bankrupt company or individual.
TSE 300 (Toronto Stock Exchange index): The stock price index representing a market capitalization average price on the Toronto Stock Exchange. This index was replace in May 2002 by the S&P/TSX Composite Index.
TSX Composite Index (Toronto Stock Exchange index): In May 2002 by the S&P/TSX Composite Index replaced the TSE300 index. The TSX index has over 200 constituents.
TSX60 Index (Toronto Stock Exchange index): The S&P/TSX Index of the 60 largest capitalization firms on the Toronto Stock Exchange.
TSXV Index (Toronto Stock Exchange Venture index): The S&P/TSXV Index of the TSX Venture Exchange.
Truth in lending law: Legislation governing the granting of credit, that requires lenders to disclose the true cost of loans and the actual interest rates and terms of the loans in a manner that is easily understood.
TT&L account: Treasury tax and loan account at a bank.
Turkey: A losing investment.
Turn: In the equities market, a reversal; unwind.
Turnaround: Securities bought and sold for settlement on the same day. Also describes a firm that has been performing poorly, but changes its financial course and improves its performance.
Turnaround time: Time available or needed to effect a turnaround.
Turnkey construction contract: A type of construction contract under which the construction firm is obligated to complete a project according to prespecified criteria for a price that is fixed at the time the contract is signed.
Turnover: For mutual funds, a measure of trading activity during the previous year, expressed as a percentage of the average total assets of the fund. A turnover rate of 25% means that the value of trades represented one-fourth of the assets of the fund. For finance, the number of times a given asset, such as inventory, is replaced during the accounting period, usually a year. For corporate finance, the ratio of annual sales to net worth, representing the extent to which a company can grow without outside capital. For markets, the volume of shares traded as a percent of total shares listed during a specified period, usually a day or a year. For Great Britain, total revenue. Percentage of the total number of shares outstanding of an issue that trades during any given period.
Turnover rate: Measures trading activity during a particular period. Portfolios with high turnover rates incur higher transaction costs and are more likely to distribute capital gains, which are taxable to nonretirement accounts.
12B-1 fees: The percent of a mutual fund's assets used to defray marketing and distribution expenses. The amount of the fee is stated in the fund's prospectus. The SEC has recently proposed that 12B-1 fees in excess of 0.25% be classed as a load. A true no load fund has neither a sales charge nor a 12b-1 fee.
12B-1 funds: Mutual funds that do not charge an up-front or back-end commission, but instead take out up to 1.25% of average daily fund assets each year to cover the costs of selling and marketing shares, an arrangement allowed by the SEC's Rule 12B-1 (passed in 1980).
Twenty bond index: A benchmark indicator of the level of municipal bond yields. It consists of the yields on 20 general obligation municipal bonds with 20-year maturities with an average rating equivalent to a1l.
Twenty-day period: The period during which the SEC inspects registration statement and preliminary prospectus prior to a new issue or secondary distribution.
20% cushion rule: Guideline that revenues from facilities financed by municipal bonds should exceed the operating budget plus maintenance costs and debt service by at least 20% to allow for unforeseen expenses.
25% rule: The guidelines that bonded debt over 25% of a municipality's annual budget is excessive.
Twisting: Convincing a customer that trades are necessary in order to generate a commission. This is an unethical practice.
Two dollar broker: Floor broker of the NYSE, who executes orders for other brokers having more business at that time than they can handle with their own private floor brokers or who do not have their exchange member on the floor.
Two-factor model: Usually, Fischer Black's zero-beta version of the capital asset pricing model. It may also refer to another type of model whereby expected returns are generated by any two factors.
Two-fund separation theorem: The theoretical result that all investors will hold a combination of the risk-free asset and the market portfolio.
Two-sided market: A market in which both bid and asked prices, good for the standard unit of trading, are quoted. When customers or market makers are lined up on both sides (buy and sell) of a stock.
Two-state option pricing model: A pricing equation allowing an underlying asset to assume only two possible (discrete) values in the next time period for each value it can take on in the preceding time period. Also called the binomial option pricing model.
Two-tier bid: Takeover bid in which the acquirer offers to pay more for the shares needed to gain control than for the remaining shares, or to pay the same price but at different times in the merger period; contrasts with any-or-all bid.
Two-tier tax system: Taxation system that results in taxing the income going to shareholders twice.
Two-twenty (2/20): Refers to the fee structure of hedge funds – annual management fee of 2% of assets and performance fee of 20% of profits.
Type: The classification of an option contract as either a put or a call.

View the next letter.

Copyright © 2023, Campbell R. Harvey. All Worldwide Rights Reserved. Do not reproduce without explicit permission.

[Version 1 June 2023.]

Keep up to date on the latest finance lingo with my new iPad/iPhone app

Download from iTunes

Order Campbell Harvey's book on the future of finance

Order via Amazon