T |
| Fifth
letter of a Nasdaq stock symbol indicating that the stock has warrants or rights. |
TAA |
| See:
Tactical asset allocation |
TABs |
| See:
Tax anticipation bill |
TANs |
| See:
Tax anticipation notes |
TBA |
| See:
To be announced |
T-period
holding-period return |
| The
percentage return over the T-year period an investment is held. |
TAC bonds |
| See:
Targeted amortization class bond. |
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)
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 ends under a probability curve. (4) The odd amount in an MBS pool. |
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 |
| Exchange of the Republic of China in Taipei. |
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 it down" |
| Reduce
the offering price or hit
others' bids to such an extent as to lower the inside market. |
Take a flier |
| To
speculate on highly risky securities. |
"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-or-pay contract |
| An
agreement that obligates the purchaser to take any product that is offered (and pay the cash purchase price) or 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. |
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. |
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. |
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
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. |
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 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 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 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 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
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 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 U.S. 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 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 |
| Firms
that prepare tax returns for a fee. |
Tax rate |
| The percentage of tax paid for different levels of income. |
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 U.S. 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 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 tax-fee acquisition. The selling shareholders
are treated as having sold their shares. |
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. |
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 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 U.S. Treasury bill rate and Eurodollar rate; used by some traders as a measure of investor/trader anxiety or credit quality. |
Teenyo |
| 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 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. |
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. |
Tenant |
| A
partial owner of a security,
or the holder of some property. See: Lessee. |
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 market price. |
Tender
offer premium |
| The premium
offered above the current market price
in a tender offer. |
Tenor |
| Maturity of a loan. |
Term |
| The
period of time during which a contract
is in force. |
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
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 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. |
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. |
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. Illiquid. |
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. |
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. |
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 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. |
TIGER |
| Acronym
for Treasury Investors Growth Receipt. U.S. 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. |
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
strategy 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 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 cancelled 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 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. |
Times-interest-earned ratio |
| Earnings before interest
and tax, divided by interest payments. |
Time-weighted
rate of return |
| Related: Geometric mean return |
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 U.S. 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. |
Top |
| Indicates
the higher price one is willing to pay for a stock
in an order; implies a not
held order. |
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. |
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 (TSE) |
| Canada's
largest stock exchange, trading
approximately 1,200 company stocks
and 33 options. |
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 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 revenue |
| Total
sales and other revenue for the period shown. Known as "turnover" in the U.K. |
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. |
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. Tracking stock is also used for internal evaluation. A firm with four divisions, for example, might set up four tracking stocks. The value-weighted sum of the four stocks exactly equals the firm's stock price observed in the market. 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 credit |
| Credit one firm grants to another firm for the purchase of goods or services. |
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 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 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. |
Trademark |
| A
distinctive name or symbol
used to identify a product or company and build recognition. Trademarks may be registered with the U.S. 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 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 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 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 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 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
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. |
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
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
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. |
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: Round-trip transactions costs,
information costs, search
costs. |
Transactions motive |
| A
desire to hold cash in order to conduct cash-based transactions. |
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
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 tax |
| A
small federal tax on the movement of ownership of all bonds (except obligations of the U.S., foreign governments, states, and municipalities) and all stocks. |
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. |
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. |
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 |
| 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 its 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 maturities of 10 years or more. |
Treasury direct |
| A
system allowing an individual investor
to make a noncompetitive bid
on U.S. Treasury securities
and thus avoid broker-dealer
fees. |
Treasury
notes |
| Debt
obligations of the U.S. Treasury that have maturities
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 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." |
Trend |
| The
general direction of the market. |
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. |
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. |
Trin |
| Used
in the context of general equities. Short-term trading index that shows a minute-by-minute correlation of the ratio of advances to declines to the ratio of advancing volume to declining volume. Depicts whether changes in the relationship of advances and declines are taking place more quickly or more slowly than changes in the general volume movement of the market, <1 indicates a bull market, 1 = neutral; and > 1 bear market. See: A/D and arms
index. |
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. |
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
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 in bankruptcy |
| An
appointed trustee who supervises and administers the affairs of a bankrupt company or individual. |
TSE 300 (Toronto Stock Exchange 100 index) |
| Canadian
form of a S&P 500. |
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. |
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 |
| Black's
zero-beta version of the capital asset pricing model. |
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. |
Type |
| The
classification of an option contract
as either a put or a call. |