A comprehensive A-to-Z listing of 2,500 financial terms
- The percentage return
over the T-year period an investment
- Tactical Asset
- An asset
allocation strategy that allows active departures
from the normal asset mix based upon rigorous
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
- (1) The difference between the average price
in Treasury auctions and the stopout price.
(2) A future money market
instrument (one available some period hence) created by buying
an existing instrument and financing the initial portion of
its life with a term repo.
(3) The extreme end under a
probability curve. (4) The odd amount in
a MBS pool.
- (1) A dealer
or customer who agrees to buy at another dealer's
offered price is said to take
that offer. (2) Also, Euro bankers speak of taking deposits
rather than buying money.
- Take a position
- To buy or
sell short; that is, to
have some amount that is owned or owed on an asset
- Take-or-pay contract
- A contract
that obligates the purchaser to take any product that is
offered to it (and pay the cash purchase price) or pay a
specified amount if it refuses to take the product.
- 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
him out of the market.
- Take-up fee
- A fee paid to an
underwriter in connection with an
offering or an underwritten forced conversion
as compensation for each share of
he underwriter obtains and must resell upon the exercise
of rights or conversion
- General term referring to transfer of control of a
firm from one group of shareholder's
to another group of shareholders.
- Taking a view
- A London expression for forming an opinion as to
where market prices are headed and acting on it.
- Taking delivery
- Refers to the buyer's actually assuming possession from
the seller of the asset agreed upon in a
forward contract or a futures
- Tandem programs
- Under Ginnie Mae,
mortgage funds provided at below-market rates to residential
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.
- TANs (tax anticipation notes)
- Tax anticipation notes issued by states or
municipalities to finance current operations in
anticipation of future tax receipts.
- Tangible asset
- An asset whose value
depends on particular physical properties. These i
assets such as buildings or machinery and
assets such as land, a mine, or a work of art.
Also called real assets. Related:
- Target cash balance
- Optimal amount of cash
for a firm to hold, considering the trade-off between the
of holding too much cash and the
trading costs of holding
too little cash.
- Target firm
- A firm that is the object of a
takeover by another firm.
- Target payout ratio
- A firm's long-run
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
- Target zone arrangement
- A monetary system under which countries pledge to
maintain their exchange rates
within a specific margin around agreed-upon, fixed central
- Targeted repurchase
- The firm buys back its own stock
from a potential bidder, usually at a substantial
premium, to forestall a
- Tax anticipation bills (TABs)
- Special bills that the
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 books
- Set of books kept by a firm's management for
the IRS that follows IRS rules. The
follow Financial Accounting Standards
- 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 to the extent required to cover
any cash deficiency of the project.
- 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
- 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 free acquisition
- A merger or consolidation
in which 1) the acquirer's
tax basis in each asset whose ownership is transferred in the
transaction is generally the same as the
2) each seller who receives only stock
does not have to pay any tax on the gain he realizes 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 Reform Act of 1986
- A 1986 law involving a major overhaul of the U.S. tax code.
- Tax shield
- The reduction in income taxes that results from taking
an allowable deduction from taxable income.
- Tax swap
- Swapping two similar bonds
to receive a tax benefit.
- Tax deferral option
- The feature of the U.S. Internal Revenue Code
that the capital gains
tax on an asset is payable only
when the gain is realized by selling the asset.
- 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-timing option
- The option to sell an asset
and claim a loss for tax purposes or not to sell the asset
and defer the capital gains
- Taxable acquisition
- A merger or
consolidation that is not
a tax-fee acquisition. The selling
shareholders are treated as having sold their shares.
- Taxable income
- Gross income less a set of deductions.
- Taxable transaction
- Any transaction that is not tax-free to the parties
involved, such as a taxable
- TBA (to be announced)
- A contract for the
purchase or sale of a
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.
- Technical analysis
- Security analysis
that seeks to detect and interpret patterns in past
- 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 capitalize
on the expected change.
- Technical condition
of a market
- Demand and supply factors affecting price,
in particular the net position, either
short, of the
- Technical descriptors
- Variables that are used to describe the market on a technical
- Technical insolvency
- Default on a legal
obligation of the firm. For example, technical insolvency occurs
when a firm doesn't pay a bill.
- Related: technical
- TED spread
- Difference between
U.S. Treasury bill
rate and eurodollar rate;
used by some traders as a measure of investor/trader anxiety.
- Temporal method
- Under this currency translation method, 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.
- To offer for delivery
- Tender offer
- General offer made
publicly and directly to a firm's
to buy their stock at a price well above the current
- Tender offer premium
- The premium
offered above the current market price in a tender offer.
- 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 10Q report is filed quarterly.
- Term bonds
- Often referred to as bullet-maturity bonds or simply
bullet bonds, bonds whose principal
is payable at maturity.
Related: serial bonds
- Maturity of a
- Term Fed Funds
- Fed Funds
sold for a period of time longer than overnight.
- 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 bonds
- Often referred to as bullet-maturity bonds or
simply bullet bonds, bonds whose
principal is payable at
- 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
- Term insurance
- Provides a death benefit only, no build-up of cash value.
- Term repo
- A repurchase
\agreement with a term of more than one day.
- Term structure
of interest rates
- Relationship between
on bonds of different maturities usually depicted in the
form of a graph often depicted as a
yield curve. Harvey
shows that inverted term structures (long rates below short rates) have preceded every
recession over the past 30 years.
- 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.
- Term premiums
- Excess of the yields
to maturity on long-term bonds over those of
- Term trust
- A closed-end fund
that has a fixed termination or
- Terminal value
- The value of a bond at
typically its par value,
or the value of an asset (or an entire firm) on some specified
future valuation date.
- Terms of sale
- Conditions on which a firm proposes to sell
its goods services for cash or credit.
- Terms of trade
- The weighted average of a nation's export prices relative to its import prices.
- Also called the fair price, the equilibrium
- Theoretical spot rate
- A curve derived from theoretical considerations
as applied to the yields of actually traded Treasury
debt securities because there are no
Treasury debt issues with a maturity greater than one year.
Like the yield curve, this
is a graphical depiction of the term structure of
- Also called time decay, the ratio of the change
in an option price to the
decrease in time to
- Thin market
- A market in which trading
volume is low and in which
consequently bid and
asked quotes are wide and the
liquidity of the instrument traded is low.
- Thinly traded
- Infrequently traded.
- Third market
securities trading in the
- Three-phase DDM
- A version of the
dividend discount model
which applies a different expected
depending on a company's life-cycle phase, growth phase,
transition phase, or maturity
- Threshold for refinancing
- The point when the
WAC of an
at a level to induce homeowners to
the mortgage in order to refinance to a lower-rate mortgage,
generally reached when the WAC of the MBS is 2% or more
above currently available mortgage rates.
- Throughput agreement
- An agreement to put a specified amount of product
per period through a particular facility. For example, an
agreement to ship a specified amount of crude oil per period
through a particular pipeline.
- 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
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
- Tight market
- A tight market, as opposed to a
thin market, is one in
which volume is large, trading
is active and highly competitive, and
spreads between bid and
ask prices are narrow.
- Tilted portfolio
- An indexing strategy
that is linked to active management through the emphasis
of a particular industry sector,
selected performance factors such as
price-earnings ratio, or selected economic factors
such as interest rates
- Time decay
- Related: theta.
- Time deposit
- Interest-bearing deposit at a savings
institution that has a specific
- Time draft
- Demand for payment at a stated future date.
- Time premium
- Also called time value, the amount by which the
option price exceeds
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 until expiration
- The time remaining until a financial contract expires.
Also called time to
- Time to maturity
- The time remaining until a financial contract expires.
Also called time
- 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 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
- 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.
rate of return
and tax, divided by interest
- Timing option
- For a Treasury
Bond or note futures
contract, the seller's choice of when in the
delivery month to deliver.
- 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.
- 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
- In the interbank market in
deposits and the foreign
exchange market, the value
(delivery) date on a
Tom next transaction is the next business day. Refers to
- Advertisement listing the
underwriters to a
equity management style
- A management style that begins with an
assessment of the overall economic environment and makes a
allocation decision regarding various sectors of
the financial markets and various industries. The bottom-up manager, in contrast,
selects the specific securities within the favored sectors.
- Total asset turnover
- The ratio of net sales to total
- Total debt to equity
- A capitalization ratio comparing
plus long-term debt to shareholders'
- 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
- Total return
- In performance measurement, the actual rate of
return realized over
period. In fixed income analysis, the potential return
that considers all three sources of return
(coupon interest, interest
on interest, and any capital gain/loss) over some i
- Total revenue
- Total sales and other revenue for the period shown.
Known as "turnover" in the UK.
- Tracking error
- In an indexing strategy,
the difference between the performance of the
benchmark and the
- A verbal (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.
- Trade credit
- Credit granted by a firm to another firm for
the purchase of goods or services.
- Trade date
- In an interest
rate swap, the date that the
commit to the swap. Also, the date on which a trade occurs.
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.
- Trade debt
- Accounts payable.
- Trade draft
- A draft addressed to a commercial enterprise.
- Trade on top of
- Trade at a narrow or no spread in basis points
relative to some other bond yield, usually Treasury bonds.
- Trade house
- A firm which deals in actual commodities.
- Persons 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 that, their objective
is to earn the bid/ask spread.
Traders can also be of the sort who take proprietary positions
whereby they seek to profit from the directional movement of
prices or spread positions.
- Buying and selling
- Trading costs
- Costs of buying and selling marketable securities
and borrowing. Trading costs include commissions,
slippage, and the bid/ask spread.
- Trading halt
- Trading of a stock, bond, option
or futures contract
can be halted by an exchange while news is being broadcast
about the security.
- Trading paper
purchased by accounts that are likely to resell them.
The term is commonly used in the Euromarket.
- Trading posts
- The posts on the floor of a stock
exchange where the
specialists stand and
securities are traded.
- Trading range
- The difference between the high and low
prices traded during
a period of time; with commodities, the high/low price
limit established by the exchange for a specific
commodity for any
one day's trading.
view (of dividend policy)
- An argument that "within reason,"
investors prefer large dividends
to smaller dividends because the dividend is sure but
future capital gains
- One of several related securities offered at
the same time. Tranches from the same offering
usually have different risk,
reward, and/or maturity
- Transaction exposure
- Risk to a firm
with known future cash flows in a
that arises from possible changes in the
- 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. Related:
- Transaction loan
- A loan extended by
a bank for a specific purpose. In contrast,
lines of credit
and revolving credit
agreements involve loans that can be used for various purposes.
demand (for money)
- The need to accommodate a firm's expected cash
- Transactions motive
- A desire to hold cash for
the purpose of conducting cash based transactions.
- Transfer agent
- Individual or institution appointed by a company
to look after the transfer of securities.
- Transfer price
- The price at which one unit of a firm sells goods
or services to another unit of the same firm.
- Transferable put right
- An option issued by the
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
- Transition phase
- A phase of development in which the company's
earnings begin to mature
and decelerate to the rate of growth of the economy
as a whole. Related:
- Translation exposure
- Risk of adverse effects on a firm's financial
statements that may arise from changes in
- The corporate officer responsible for designing
and implementing many of the firm's financing and
- 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.
- Related: treasury
- U.S. 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 the financial operations including the issuance of new shares.
- Treasury bills
- Debt obligations of
the U.S. Treasury that have
maturities of one year or less. Maturities for
T-bills are usually 91 days, 182 days, or 52 weeks.
- Treasury bonds
- debt obligations of the
U.S. Treasury that have
of 10 years or more.
- Treasury notes
- Debt obligations of
the U.S. Treasury that have
of more than 2 years but less than 10 years.
- Treasury securities
- Securities issued by
the U.S. Department of the Treasury.
- Treasury stock
- Common stock that
has been repurchased by the company and held in the
- The general direction of the market.
- 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
- Triangular arbitrage
- Striking offsetting deals among three markets simultaneously
to obtain an arbitrage profit.
- Triple witching hour
- The four times a year that the S&P
expires at the same
time as the S&P 100 index option contract
and option contracts
on individual stocks.
- The transition point between economic recession
- True interest cost
- For a security such as
that is sold on a discount basis,
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 deed
- Agreement between trustee and borrower
setting out terms of bond.
- Trust receipt
- Receipt for goods that are to be held in
trust for the lender.
- TT&L account
- Treasury tax and loan account at a bank.
- Securities bought and sold for
settlement on the
same day. Also, when a firm that has been performing
poorly changes its financial course and improves its performance.
- Turnaround time
- Time available or needed to effect a
- Turnkey construction
- 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.
- 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
ratio of 25% means that the value of trades
represented one-fourth of the assets of the fund.
Finance: The number of times a given asset, such as inventory,
is replaced during the accounting period,
usually a year. Corporate: The ratio of annual sales
to net worth, representing the extent to which
a company can growth without outside capital.
Markets: The volume of
traded as a percent of total shares listed during a
specified period, usually a day or a year.
Great Britain: total
- 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
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 12b-1 fee.
- 12b-1 funds
- Mutual funds that do not charge an upfront
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-I (passed in 1980).
- Two-factor model
- Black's zero-beta version of the
asset pricing model.
- Two-fund separation theorem
- The theoretical result that all investors
will hold a combination of the risk-free
and the market portfolio.
- Two-sided market
- A market in which both bid
prices, good for the standard unit of trading, are quoted.
option pricing model
- An option pricing
model in which the underlying
asset can take on only two possible (discrete) values in
the next time period for each value it can take on in
the preceding time period. Also called
option pricing model.
- Two-tier tax system
- A method of taxation in which the income
going to shareholders
is taxed twice.
- The classification of an
either a put or a