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Financial Glossary
| a b c d e f g h i j k l m n o p q r s t u v w x y z
Compiled by Campbell R. Harvey, J. Paul Sticht Professor of International Business, Fuqua School of Business, Duke University. |
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T
Fifth letter of a Nasdaqstock 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 TC The two-character ISO 3166 country code for TURKS AND CAICOS ISLANDS. TD The two-character ISO 3166 country code for CHAD. TEFRA (Tax Equity and Fiscal Responsibility Act of 1983) The law requiring federal income tax withholding on payments of dividend and interest to accounts without a certified tax identification number on file. See: W-9. TF The two-character ISO 3166 country code for FRENCH SOUTHERN TERRITORIES. TG The two-character ISO 3166 country code for TOGO. TH The two-character ISO 3166 country code for THAILAND. THB The ISO 4217 currency code for the Thai Baht. TIGER See: Treasury Investors Growth Receipt TIIS See: Treasury inflation-indexed securities TIPS See: Treasury inflation-proteced securities TITAL See: Transaction insured trade acceptance locator TJ The two-character ISO 3166 country code for TAJIKISTAN. TJR The ISO 4217 currency code for the Tajikistan Rouble. TK The two-character ISO 3166 country code for TOKELAU. TM The two-character ISO 3166 country code for TURKMENISTAN. TMM The ISO 4217 currency code for the Turkmenistan Manet. TN The two-character ISO 3166 country code for TUNISIA. TND The ISO 4217 currency code for the Tunisian Dinar. TO The two-character ISO 3166 country code for TONGA. TOP The ISO 4217 currency code for the Tonga Pa'anga. TP The two-character ISO 3166 country code for EAST TIMOR. TR The two-character ISO 3166 country code for TURKEY. TRL The ISO 4217 currency code for the Turkish Lira. TT The two-character ISO 3166 country code for TRINIDAD AND TOBAGO. TTD The ISO 4217 currency code for the Trinidad and Tobago Dollar. TTM Trailing 12 months. Often used with Earnings Per Share. TV The two-character ISO 3166 country code for TUVALU. TW The two-character ISO 3166 country code for TAIWAN, PROVINCE OF CHINA. TWD The ISO 4217 currency code for the Taiwan Dollar. TZ The two-character ISO 3166 country code for TANZANIA, UNITED REPUBLIC OF. TZS The ISO 4217 currency code for the Tanzania Shilling. T-period holding-period return The percentage return over the T-year period an investment is held. T+3 The settlement date for securitiestransactions such as a stock sale. It refers to the obligation in the brokerage business to settle securities trades by the third day following the trade date. The settlement occurs when the seller receives the sales price (the broker's commission) and the buyer receives the shares. Tabulation Report A proxy tally report detailing the current quorum and vote figures on each proposal. TAC bonds See: Targeted amortization class bond. 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 forecastedvariables may be functions of fundamental variables, economic variables, or even technical variables. Tail The remaining reserves after a project financing has been repaid. Sometimes refers to the residual value. Tailgating Purchase of a security by a broker after the broker places an order for the same security for a customer. The broker hopes to profit either because of information which the customer has or because the customer's purchase is of sufficient size to affect security prices. This is an unethical practice. Taiwan Stock Exchange (TSEC) Established in 1961, the only centralized securities market in Taiwan. Take (1) To agree to buy. A dealer or customer who agrees to buy at another dealer's offered price is said to take the offer. (2) Euro bankers speak of taking deposits rather than buying money. Take a bath To sustain a loss on either a speculation or an investment. Take a flier To speculate on highly riskysecurities. "Take it down" Reduce the offering price or hit others' bids to such an extent as to lower the inside market. "Take me along" "Allow me to participate in the side of a particular trade. Take off A sharp increase in the price of a stock, or a positive movement of the market as a whole. Take the offer Buystock 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 cashsurplus generated by the sale of one block of securities and the purchase of another, e.g., selling a block of bonds at 99 and buying another block at 95. Also, a bid made to a seller of a security that is designed (and generally agreed) to take the seller out of the market. Take-and-pay contract An agreement that obligates the purchaser to take any product that is offered (and pay the cash purchase price) and pay a specified amount if the product is not taken. Take a position To buy or sell short; that is to own or to owe some amount on an asset or derivative security. Take a powder Temporarily cancel an order or indication in a stock, while unrepresented interest still exists. See: Back on the shelf, sidelines. Take a swing Execute a trade at a price that the trader feels is higher or more risky than would normally be acceptable, in order to gain market share in the institutional arena. Takedown The share of securities of each participatinginvestment banker in a new or a secondary offering, or the price at which the securities are distributed to the different members of an underwriting group. Takeout A financing to refinance or take out another loan. 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 publictender 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 underwrittenrights 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 assetsminusintangible assets, which include patents and copyrights, and total liabilities. Tangibility Characteristic that an assets can be used as collateral to secure debt. Tape (1) Service that reports prices and sizes of transactions on major exchanges-ticker tape. (2) Dow Jones and other news wires. See: Consolidated tape. Tape is late When the tradingvolume is so heavy that trades appear on the tape more than a minute behind the timer they actually take place. Tare Weight The weight of an empty container and any packaging materials used in the container. Tariff A tax on imports or exports. Target cash balance Optimal amount of cash for a firm to hold, considering the trade-off between the opportunity costs of holding too much cash and the trading costs of holding too little cash. Target company Often used in risk arbitrage. Firm chosen as an attractive takeover candidate by a potential acquirer. The acquirer may buy up to 5% of the target'sstock without publicdisclosure, but it must report all transactions and supply other information to the SEC, the exchange the target company is listed on, and the target company itself once the 5% threshold is hit. See: Raider. Target firm A firm that is the object of a takeover by another firm. Target investment mix The percentage mix of stocks, bonds, and short-termreserves that an investor considers appropriate based on his/her personal objectives, time horizon, risk tolerance, and financial resources. Target Leverage Ratio The ratio of the market value of debt to the total market value of the firm that management seeks to maintain. Target payout ratio A firm's long-run dividend-to-earnings ratio. The firm's policy is to attempt to pay out a certain percentage of earnings, but it pays a stated dollar dividend and adjusts it to the target as base line increases in earnings occur. Target price In the context of takeovers, the price at which an acquirer aims to buy a target firm. In the context of options, the price of the underlying security at which an option will become in the money. In the context of stocks, the price that an investor hopes a stock will reach in a certain time period. Target zone arrangement A monetary system under which countries pledge to maintain their exchange rates within a specific margin around agreed-upon, fixed central exchange rates. Target zones Implicit boundaries on exchange rates established by central banks. Targeted registered offerings Securitiesissues sold to "targeted" foreign financial_institutions according to U.S. Securities and Exchange Commission guidelines. These foreign institutions then maintain a secondary market in the foreign market. Targeted repurchase Buying back of a firm'sstock 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 trancheclass of some CMOs, according to a sinking fund schedule. They differ from PAC bonds whose amortization is guaranteed as long as prepayments on the underlyingmortgages 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 quarterlyincome tax dates and can be used at face value by corporations to pay their tax liabilities. Tax Anticipation Notes (Tans) Notes issued by states or municipalities to finance current operations in anticipation of future tax receipts. Tax arbitrage Trading that takes advantage of a difference in tax rates or tax systems as the basis for profit. Tax audit Audit by the IRS or other tax-collectingagency 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'scommission. Tax books Records kept by a firm'smanagement that follow IRS rules. The books follow Financial Accounting Standards Board rules. Tax bracket The percentage of tax obligation for a particular taxable income. Tax clawback agreement An agreement to contribute as equity to a project the value of all previously realized project-related tax benefits not already clawed back. Exercised to the extent required to cover any cash deficiency of the project. Tax clientele Categories of investors who have specific preferences for debt or equity because of differences in their personal tax rates. Tax credit A direct dollar-for-dollar reduction in tax allowed for expenses such as child care and R&D for building low-income housing. Compare tax deduction. Tax-deductible The effect of creating a tax deduction, such as charitable contributions and mortgageinterest. Tax deduction An expense that a taxpayer is allowed to deduct from taxable income. Tax-deferred income Dividends, interest, and unrealized capital gains on investments in an account such as a qualified retirement plan, where income is not subject to taxation until a withdrawal is made. Tax deferral option Allowing the capital gains tax on an asset to be payable only when the gain is realized by selling the asset. Tax-deferred retirement plans Employer-sponsored and other plans that allow contributions and earnings to be made and accumulate tax-free until they are paid out as benefits. Tax differential view (of dividend policy) The view that shareholders prefer capital gains over dividends, and hence low payout ratios, because capital gains are effectively taxed at lower rates than dividends. Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) Legislation to increase tax revenue by eliminating various taxation loopholes and instituting tougher enforcement procedures in collecting taxes. Tax-equivalent yield The pre-tax yield required from a taxable bond in order to equal the tax-free yield of a municipal bond. Tax evasion Illegal by reducing tax burden by underreporting income, overstating deductions, or using illegal tax shelters. Tax-exempt bond A bond usually issued by municipal, county, or state governments whose interest payments are not subject to federal and, in some cases, state and local income tax. Tax-exempt income Dividends and interest not subject to federal and, in some cases, state and local income taxes. Tax-exempt income fund A mutual fund that seeks income that is exempt from federal and, in some cases, state and local income taxes. Tax-exempt money market fund A money market fund that invests in short-term tax-exempt municipal securities. Tax-exempt sector The municipal bond market where state and local governments raise funds. Bonds issued in this sector are exempt from federal income taxes. Tax-exempt security An obligation whose interest is tax-exempt, often called a municipal bond, offered by a country, state, town, or any political district. Tax free acquisition A merger or consolidation in which (1) the acquirer'stax basis on each asset whose ownership is transferred in the transaction is generally the same as the acquiree's, and (2) each seller who receives only stock does not have to pay any tax on the gain realized until the shares are sold. Tax haven A nation with a moderate level of taxation and/or liberal tax incentives for undertaking specific activities such as exporting or investing. Tax haven affiliate A wholly owned entity in a low-tax jurisdiction that is used to channel funds to and from a multinational's foreign operations. The tax benefits of tax haven affiliates were largely removed in the US by the Tax Reform Act of 1986. Tax holiday A reduced tax rate that a government provides as an inducement to foreign direct investment. Tax liability The amount in taxes a taxpayer to the government. Tax lien The right of the government to enforce a claim against the property of a person owing taxes. Tax and loan account An account at a private bank, held in the name of the district Federal Reserve Bank, which holds operating cash for the business of the US Treasury. Tax loss carryback, carryforward A tax benefit that allows business losses to be used to reduce tax liability in previous and or following years. Tax-neutrality Characteristic that taxes do not interfere with the natural flow of capital toward its most productive use. Tax planning Devising strategies throughout the year in order to minimize tax liability, for example, by choosing a tax filing status that is most beneficial to the taxpayer. Tax preference item Items that must be included when calculating the alternative minimum tax. Tax preparation services Firm that prepare tax returns for a fee. Tax rate The percentage of tax paid for different levels of income. Tax Reduction Strategy A source of competitive advantage that depends on differences in the tax rates imposed in different locations. Tax Reform Act of 1976 Legislation aimed at tightening provisions relating to taxation, including changes in the capital gains tax laws. Tax Reform Act of 1984 Legislation enacted as part of the Deficit Reduction Act of 1984 to reduce the federal budget deficit. Among its provisions are a decrease in the minimum holding period for assets to qualify for long-termcapital gains treatment from one year to six months. Tax Reform Act of 1986 A 1986 law involving a major overhaul of the US tax code. Tax Reform Act of 1993 See: Revenue Reconciliation Act of 1993 Tax refund Money back from the government when too much tax has been paid or withheld from a salary. Tax schedules Tax forms used to report itemized deductions, dividend and interest income, profit or loss from a business, capital gains and losses, supplemental income and loss, and self-employment tax. Tax selling Selling of securities to realize losses that will offset capital gains and reduce tax liability. See: Wash sale. Tax shelter Legal methods taxpayers can use to reduce tax liabilities. An example is the use of depreciation of assets. Tax-sheltered annuity A type of retirement plan under Section 403(b) of the Internal Revenue Code that permits employees of public educational organizations or tax-exempt organizations to make before-tax contributions via a salary reduction agreement to a tax-sheltered retirement plan. Employers are also allowed to make direct contributions on behalf of employees. Tax shield The reduction in income taxes that results from taking an allowable deduction from taxable income. Tax software Computer software designed to assist taxpayers in filling out tax returns and minimizing tax liability. Tax status election The decision of the status under which to file a tax return. For example, a corporation may file as a C corporation or an S corporation. Tax straddle Technique used in futures and optionstrading to create tax benefits. For example, an investor with a capital gain takes a position creating an artificial offsettingloss in the current tax year and postponing a gain from the position until the next tax year. Tax swap Swapping two similar bonds to receive a tax benefit. Tax-timing option The option to sell an asset and claim a loss for tax purposes or not sell the asset and defer the capital gains tax. Tax umbrella Tax loss carryforwards from previous business losses that form a tax shelter for profits earned in current and future years. Taxpayer Relief Act of 1997 Legislation forming part of a larger act designed to balance the federal budget. Some of the legislation's provisions included tax credits for taxpayers supporting children, an increase in the amount that could be excluded from estate taxes, and a lower capital gains tax rate. Taxable acquisition A merger or consolidation that is not a acquisition. The selling shareholders are treated as having sold their shares. Taxable equivalent yield The return from a higher-paying but taxable investment that would equal the return from a tax-free investment. This depends on the investor'stax bracket. Taxable estate That portion of a deceased person's estate that is subject to transfer tax. Taxable event An event or transaction that has a tax consequence, such as the sale of stockholding that is subject to capital gains taxes. Taxable income Gross income less a variety of deductions. Taxable municipal bond Taxed private-purpose bonds issued by the state or local government to finance prohibited projects such as sports stadiums. Taxable transaction Any transaction that is not tax-free to the parties involved, such as a taxable acquisition. Taxable year The 12-month period an individual uses to report income for income tax purposes. For most individuals, their tax year is the calendar year. Tear sheet A page from an S&Pstock 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 securityprices. Technical analysts Also called chartists or technicians, analysts who use mechanical rules to detect changes in the supply of and demand for a stock, and to capitalize on the expected change. Technical condition of a market Demand and supply factors affecting price, in particular, the net position, either long or short, of the dealer community. Technical descriptors Variables that are used to describe the market in terms of patterns in historical data. Technical forecasting A forecasting method that uses historical prices and trends. Technical Information Information related to the momentum of a particular variable. In market analysis, technical information is information related to market dynamics and crowd behavior only. Technical insolvency Default on a legal obligation of the firm. Technical insolvency occurs when a firm doesn't pay a bill on time. Technical rally Short rise in securities or commoditiesfutures 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-termtrend in the price movement of a security that analysts recognize as significant. Technician Related: Technical analysts TED spread Difference between US Treasury bill rate and Eurodollar rate; used by some traders as a measure of investor/trader anxiety or credit quality. Teeny 1/16 or 0.0625 of one full point in price. Steenth. Tel Aviv Stock Exchange Israel's only stock exchange. Telephone switching Moving one's assets from one mutual fund or variable annuity to another by telephone. Temporal method A currency translation method under which the choice of exchange rate depends on the underlying method of valuation. Assets and liabilities valued at historical cost (marketcost) are translated at the historical (current market) rate. Temporary Assets That portion of a firm'scurrent assets that fluctuates in response to seasonal or anticipated short-term. Temporary Financing The sum of negotiated current liabilities and temporary spontaneous current liabilities. Temporary investment A short-terminvestment, such as a money market fund, Treasury bills, or short-term CD, which is usually held a year or less. Ten largest holdings The percentage of a portfolio's total net assets or equityholdings in its ten largest securitiespositions. As this percentage rises, a portfolio'sreturns are likely to be more volatile because they are more dependent on the fortunes of fewer companies. 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 issuediscount securities. 1099 B The tax statement used for reportingproceeds resulting from the sale, redemption or liquidation of shares. 1099 DIV The tax statement used for reportingdividends paid to registered shareholders. Ten-Day Rule The New York Stock Exchange rule permitting member firms (brokers) to vote in favor of management ten days or less before the meeting, provided that the member firm mailed proxy material to beneficial owners at least 15 business days before the meeting. The rule allows many shares to be voted, which would otherwise not be, to reach a quorum, approve the choice of directors and auditors and handle other routine matters. This rule does not apply to banks, their nominees or their depository positions, nor to non-routine proposals such as approval for the corporation to issue more shares. Tenant A partial owner of a security, or the holder of some property. See: Lessee. Tenants by Entireties (TEN ENT) Joint ownership of property or securities by a husband and wife where, upon the death of one, the property goes to the survivor. Tenants in common Account registration in which two or more individuals own a certain proportion of an account. Each tenant's proportion is distributable as part of the owners estate, so that if one of the account holders dies, that owner's heirs are entitled to that proportional share of the account. Tenbagger A stock that grows in value ten-fold. Tender To offer for delivery against futures. Tender offer General offer made publicly and directly to a firm'sshareholders to buy their stock at a price well above the current value market price. Tender offer premium The premium offered above the current market price in a tender offer. Tenor The length of time until a loan is due. For example, a loan is taken out with a two year tenor. After one year passes, the tenor of the loan is one year. Term The period of time during which a contract is in force. Term bonds Bonds whose principal is payable at maturity. Often referred to as bullet-maturitybonds 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-termbonds 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 Delivery The part of a salescontract that indicates the point at which title and risk of loss of merchandise pass from the seller to the buyer. See: Incoterms. Terms of sale Conditions under which a firm proposes to sell its goods or services for cash or credit. Terms of trade The weighted average of a nation's export prices relative to its import prices. Territorial tax system A tax system that taxes domestic income but not foreign income. Territorial tax regimes are found in Hong Kong, France, Belgium, and the Netherlands. Test The event of a price movement that approaches a support level or a resistance level established earlier by the market. A test is passed if prices do not go below the support or resistance level, and the test is failed if prices go on to new lows or highs. Testamentary trust A trust created by a will, that is scheduled to occur after the maker's death. The Curb Another name for the American Stock Exchange (AMEX). The Desk The trading desk at the Federal REserve Bank of New York through which open market purchases and sales of government and federal agancy securities are made. The desk maintains direct telephone communication with major government securities dealers. A "foreign desk" at the Federal Reserve Bank of New York conducts transactions in the foregin exchange market. Theoretical futures price The equilibriumfutures price. Also called the fair price. Theoretical spot rate curve A curve derived from theoretical considerations as applied to the yields of actually tradedTreasurydebt securities, because there are no zero-coupon Treasury debtissues 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 tradingvolume is low, and consequently bid and asked quotes are wide and the instrumenttraded is not very liquid. Very little stock to buy or sell. Thinly traded Infrequently traded. Third market Exchange-listedsecuritiestrading 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'slife-cycle phase: growth phase, transition phase, or maturity phase. Three steps and a stumble rule A rule predicting that stock and bond prices will fall following three increases in the discount rate by the Federal Reserve. This is a result of increased costs of borrowing for companies and the increased attractiveness of money market funds and CDs over stocks and bonds as a result of the higher interest rates. Threshold for refinancing The point when the weighted-average coupon of an MBS is at a level to induce homeowners to prepay the mortgage in order to refinance to a lower-rate mortgage, generally reached when the weighted-average coupon of the MBS is 2 percentage points or more above currently available mortgage rates. Thrift institution An organization formed as a depository for primarily consumer savings. Savings and loan associations and savings banks are thrift institutions. Thrift Institution Advisory Council (TIAC) A council, established following the passage of the Monetary Control Act of 1980, whose purpose is to provide information and views on the special needs and problems of thrifts. The group is comprised of representatives of savings banks, savings and loan associations, and creditor unions. Thrift plan A defined contribution plan in which an employee contributes, usually on a before-tax basis, toward the ultimate benefits that will be provided. The employer usually agrees to match all or a portion of the employee's contributions. 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 marketindicator based on the number of stocks whose last trade was an uptick or a downtick. Used as an indicator of market sentiment or psychology to try to predict the market's trend. Tick-test rules SEC-imposed restrictions on when a short sale may be executed, intended to prevent investors from destabilizing the price of a stock when the market price is falling. A short sale can be made only when either (1) the sale price of the particular stock is higher than the last trade price (referred to as an uptick trade) or (2) if there is no change in the last trade price of the particular stock, the previous trade price must be higher than the trade price that preceded it (referred to as a zero uptick). Ticker symbol An abbreviation assigned to a security for trading purposes. Ticker tape Computerized device that relays to investors around the world the stock symbol and the latest price and volume on securities as they are traded. Ticket An abbreviation of order ticket. Tier 1 and Tier 2 Descriptions of the capital adequacy of banks. Tier 1 refers to core capital while Tier 2 refers to items such as undisclosed resources. Tight In line with or extremely close to the inside market or last sale in a stock (+/- 1/8). On the money. Tight market A market in which volume is high, trading is active and highly competitive, and consequently spreads between bid and ask prices are narrow. Tight money When a restricted money supply makes credit difficult to secure. The antithesis of tight money is easy money. Tiki Tick of Dow Jones Industrial Average component issues. Tilted portfolio An indexingstrategyy that is linked to active management through the emphasis of a particular industrysector, selected performance factors such as earningsmomentum, dividend yield, price-earnings ratio, or selected economic factors such as interest rates and inflation. Time decay Related: Theta Time deposit Interest-bearing deposit at a savings institution that has a specific maturity. Related: Certificate of deposit. Time draft Demand for payment at a stated future date. Time horizon The period, usually expressed in years, for which an investor expects to hold an investment. Time Letter of Credit See: Usance Letter of Credit. Time to maturity The time remaining until a financialcontract expires. Also called time until expiration. Time order Order that becomes a market or limited price order or is canceled at a specific time. Time premium Also called time value, the amount by which an option price exceeds its intrinsic value. The value of an option beyond its current exercise value representing the optionholder's control until expiration, the risk of the underlying asset, and the riskless return. Time-series analysis Assessment of relationships between two or among more variables over periods of time. Time series models Systems that examine series of historical data; sometimes used as a means of technical forecasting, by examining moving averages. Time spread strategy Buying and selling puts and calls with the same exercise price but different expiration dates, and trying to profit from the different premiums of the options. Time until expiration The time remaining until a financialcontract expires. Also called time to maturity. Time value Applies to derivative products. Portion of an option price that is in excess of the intrinsic value, due to the amount of volatility in the stock; sometime referred to as premium. Time value is positively related to the length of time remaining until expiration. Time value of money The idea that a dollar today is worth more than a dollar in the future, because the dollar received today can earn interest up until the time the future dollar is received. Time value of an option The portion of an option's premium that is based on the amount of time remaining until the expiration date of the option contract, and the idea that the underlying components that determine the value of the option may change during that time. Time value is generally equal to the difference between the premium and the intrinsic value. Related: In the money. Time value permium The amount by which an option's total premium exceeds its intrinsic value. Times-interest-earned ratio Earnings before interest and tax, divided by interest payments. Time-weighted rate of return Related: Geometric meanreturn Time-Zone Arbitrage A form of stale price arbitrage where the pricing discrepencies are due to the primary markets for the underlying securities being closed at the times that the fund is traded. Note that time zone arbitrage is sometimes mistakenly used if it were a pure synonym for stale price arbitrage. These are not synonyms since stale prices can also be due to illiquid stocks or bonds that are not traded frequently. Timeliness A source of competitive advantage that depends on being the first to enter a given market with a product or service. Timing See: Market timing Timing option The seller's choice of when in the delivery month to deliver. A Treasury Bond or notefutures 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 tradingfutures on gold, silver, platinum, palladium, rubber, cotton yarn, and woolen yarn. Tokyo International Financial Futures Exchange Exchange that trades Euroyen futures and options, and futures on the one-year Euroyen, three-month eurodollar, and US dollar/Japanese yen currency. Tokyo Stock Exchange (TSE) The largest stock exchange in Japan with the some of the most activetrading 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 securityissue. Ton $100 million in bondtrader'sterms. too-big-too-fail Government practices that protect large banking organizations from the normal discipline of the marketplace because of concerns that such institutions are so important to markets and their positions so intertwined with those of other banks that their failure would be unacceptably disruptive, financially and economically. Top Indicates the higher price one is willing to pay for a stock in an order; implies a not held order. Top-down approach A method of security selection that starts with asset allocation and works systematically through sector and industry allocation to individual security selection. Top-down equity management style Investment style that begins with an assessment of the overall economic environment and makes a general asset allocation decision regarding various sectors of the financial markets and various industries. The bottom-up manager, in contrast, selects specific securities within the particular sectors. Top-heavy At a price level where supply is exceeding demand. See: Resistance level. Topline growth Growth in revenues. Also see: Bottomline growth. 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-termdebt and all types of equity of a company that constitutes its capital structure. Total cost The price paid for a security plus the broker'scommission 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-termdebt 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 currencygains or losses on the investment. See also: Total return. Total Market Capitalization The total market value of all of a firm'soutstandingsecurities. Total return In performance measurement, the actual rate of return realized over some evaluation period. In fixed income analysis, the potential return that considers all three sources of return (coupon interest, interest on coupon interest, and any capital gain/loss) over some investment horizon. Total return for calendar year The profit or loss realized by an investment at the end of a specified calendar year, stated as the percentage gained or lost per dollar invested on January 1. Total revenue Total sales and other revenue for the period shown. Known as "turnover" in the U.K. Total risk The sum of systematic and unsystematic risk. Total volume The total number of shares or contractstraded on national and regional exchanges in a stock, bond, commodity, future, or option on a certain day. Touch, the Mainly applies to international equities. Inside market in London terminology. Tough on price Firm price mentality at which one wishes to transact stock, often at a discount/premium that is not available at the time. Tout To promote a security in order to attract buyers. Toxic Convertible Used by companies that are in such bad shape, that there is no other way to get financing. This instrument is similar to a convertible bond, but convertible at a discount to the share price at issuance and for a fixed dollar amount rather than a specific number of shares. The further the stock falls, the more shares you get. Popular in the mid to late 1990s. Also known as death spiral convertibles or floorless convertibles. Tracers Refers to investment trusts which are populated by corporate bonds. In October 2001, Morgan Stanley's Tradable Custodial Receipts (Tracers) was launched. Tracers contain a number of coporate bonds and credit default swaps which are selected for liquidity and diversity. Lehman Brothers launched a similar product, Targeted Return Index Securities (Trains) in January 2002. Both contain investment grade bonds. If a bond falls out of the investment grade category, it is either liquidated from the trust or delivered to the investor. Both Tracers and Trains are 144a trust structures and are only available to qualified buyers because they are considered private securities due to the trust structure. Tracking error In an indexingstrategy, 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 purchasingput options on A's shares or short-selling A's shares. B is worried that the market may fall in the |