Bloomberg Financial Glossary
Bloomberg Financial Glossary
letter  Campbell R. Harvey
Fifth letter of a Nasdaq stock symbol indicating that the stock has warrants or rights.
See: Tactical asset allocation
See: Tax anticipation bill
See: Tax anticipation notes
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.
(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.
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.
(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.
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.
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.
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.
(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.
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.
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.
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.
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.
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.
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.
A statement sent to the IRS and taxpayers by the payers of dividends and interest and by issuers of taxable original issue discount securities.
A partial owner of a security, or the holder of some property. See: Lessee.
A stock that grows in value ten-fold.
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.
Maturity of a loan.
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.
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.
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.
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.
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.
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.
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.
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
See: Market timing
Timing option
The seller's choice of when in the delivery month to deliver. A Treasury Bond or note futures contract.
Information given by one trader to another, which is used in making buy or sell decisions but is not available to the general public.
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.
Advertisement listing the underwriters of a security issue.
$100 million in bond trader's terms.
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.
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.
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.
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.
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.
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.
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.
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.
One of several related securities offered at the same time. Tranches from the same offering usually have different risk, reward, and/or maturity characteristics.
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.
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.
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.
Related: Treasury securities
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."
The general direction of the market.
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.
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.
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.
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.
A losing investment.
In the equities market, a reversal; unwind.
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.
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.
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.
The classification of an option contract as either a put or a call.

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