Campbell R. Harvey's Hypertextual Finance Glossary

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T: Fifth letter of a NASDAQ stock symbol specifying that the stock has warrants or rights.
T.A.A.: See: Tactical asset allocation
T.A.B.s: See: Tax anticipation bill
T.A.N.s: See: Tax Anticipation Notes
T.B.A.: See: To be announced
T-period holding-period return: The percentage return over the T-year period an investment lasts.
Tactical Asset Allocation (T.A.A.): Portfolio strategy that allows active departures from the normal asset mix based upon rigorous objective measures of value. Often called active management. It involves forecasting asset returns, volatilities and correlations. The forecasted variables may be functions of fundamental variables, economic variables or even technical variables.
Tail: (1) The difference between the average price in Treasury auctions and the stopout price. (2) A future money market instrument (one available some period hence) created by buying an existing instrument and financing the initial portion of its life with a term repo. (3) The extreme ends under a probability curve. (4) The odd amount in a M.B.S. pool.
Take: (1) A dealer or customer who agrees to buy at another dealer's offered price is said to take that offer. (2) Also, Euro bankers speak of taking deposits rather than buying money.
Take a position: To buy or sell short; that is, to have some amount that is owned or owed on an asset or derivative security.
Take a powder: Used in the context of general equities. Temporarily cancel an order or indication in a stock by a customer, while unrepresented interest still exists. See: back on the shelf, sidelines.
Take a swing: Used in the context of general equities. Execute a trade at a price which the trader feels is more rich/risky than he would normally accept, in order to gain market share within the institutional arena.
"Take it down": Used in the context of general equities. Lower the offering price or hit others' bids to such an extent as to lower the inside market.
"Take me along": Used in the context of general equities. "Allow me to participate in the side of the trade just referenced."
Take-or-pay contract: A contract that obligates the purchaser to take any product that is offered (and pay the cash purchase price) or pay a specified amount if he/she refuses to take the product.
Take-out: A cash surplus generated by the sale of one block of securities and the purchase of another, e.g. selling a block of bonds at 99 and buying another block at 95. Also, a bid made to a seller of a security that is designed (and generally agreed) to take him out of the market.
Takeover: Often used in risk arbitrage. Change in the controlling interest of a corporation, either through a friendly acquisition or an unfriendly, hostile, bid. A hostile takeover (aiming to replace existing management) is usually attempted through a public tender offer. General term referring to transfer of control of a firm from one group of shareholders to another group of shareholders.
Takes a call: Used in the context of general equities. Requires a call to an account in order for the trade to be completed. See: show me.
Takes price: Used in the context of general equities. Requires some price movement or concession on behalf of the initiating party before the trade can be consummated. See: price give.
Take the offer: Used in the context of general equities. Buy stock by accepting a floor broker's (listed) or dealer's (O.T.C.) Offer at an agreed-upon volume. Antithesis of hit the bid.
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.
Taking a view: A London expression for forming an opinion as to where market prices are headed and acting on it.
Taking delivery: Refers to the buyer's actually assuming possession from the seller of the assets agreed upon in a forward contract or a futures contract.
Tandem programs: Under Ginnie Mae, mortgage funds provided at below-market rates to residential M.B.S. 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.
Tax Anticipation Notes (T.A.N.s): Tax anticipation notes are issued by states or municipalities to finance current operations in anticipation of future tax receipts.
Tangible asset: An asset whose value depends on particular physical properties. These 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. Related: Intangible asset
Tape: Used in the context of general equities. 1) Service that reports prices and size of transactions on major exchanges -- ticker tape. 2) Dow Jones and other news wires. See: consolidated tape.
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 that has been chosen as attractive for takeover 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 S.E.C., the exchange the target company is listed on, and the target company itself once the 5% threshold is hit. See: raider.
Targeted repurchase: The firm buys back its own stock from a potential acquirer, usually at a substantial premium, to forestall a takeover attempt. Related: Greenmail
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 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.
Taxable acquisition: A merger or consolidation that is not a tax-fee acquisition. The selling shareholders are treated as having sold their shares.
Taxable income: Gross income less a set of deductions.
Taxable transaction: Any transaction that is not tax-free to the parties involved, such as a taxable acquisition.
Tax anticipation bills (T.A.B.s): 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 books: Set of books kept by a firm's management for the IRS that follows IRS rules. The stockholder's books follow Financial Accounting Standards Board rules.
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 deferral option: The feature of the U.S. Internal Revenue Code that the capital gains tax on an asset is payable only when the gain is realized by selling the asset.
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-exempt sector: The municipal bond market where state and local governments raise funds. Bonds issued in this sector are exempt from federal income taxes.
Tax free acquisition: A merger or consolidation in which 1) the acquirer's tax basis 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 he realizes until the shares are sold.
Tax haven: A nation with a moderate level of taxation and/or liberal tax incentives for undertaking specific activities such as exporting or investing.
Tax Reform Act of 1986: A 1986 law involving a major overhaul of the U.S. tax code.
Tax shield: The reduction in income taxes that results from taking an allowable deduction from taxable income.
Tax selling: Used in the context of general equities. Unloading of long positions in stock for tax purposes, usually to use these capital losses to offset previously earned profit. See: wash sale.
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.
To be announced (T.B.A.): A contract for the purchase or sale of a M.B.S. to be delivered at an agreed-upon future date but does not include a specified pool number and number of pools or precise amount to be delivered.
Technical analysis: Security analysis that seeks to detect and interpret patterns in past 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 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.
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Technical descriptors: Variables that are used to describe the market on a technical basis.
Technical insolvency: Default on a legal obligation of the firm. For example, technical insolvency occurs when a firm doesn't pay a bill on time.
Technical rally: Used in the context of general equities. Short rise in securities or commodities futures prices within 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.
Technician: Related: technical analysts
TED spread: Difference between U.S. Treasury bill rate and Eurodollar rate; used by some traders as a measure of investor/trader anxiety or credit quality.
Teenyo: 1/16 or .0625 of one full point in price. Steenth.
Temporal method: Under this currency translation method, the choice of exchange rate depends on the underlying method of valuation. Assets and liabilities valued at historical cost (market cost) are translated at the historical (current market) rate.
Tender: To offer for delivery against futures.
Tender offer: General offer made publicly and directly to a firm's shareholders to buy their stock at a price well above the current market price.
Tender offer premium: The premium offered above the current market price in a tender offer.
10-K: Annual report required by the S.E.C. 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 S.E.C. each quarter. Provides a comprehensive overview of a company's state of business.
Tenor: Maturity of a loan.
Term bonds: Often referred to as bullet-maturity bonds or simply bullet bonds, bonds whose principal is payable at maturity. Related: serial bonds
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 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 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 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.
Terms of sale: Conditions on 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.
Theoretical futures price: Also called the fair price, the equilibrium futures 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 graphical 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: Also called time decay, the ratio of the change in an option price to the decrease in time to expiration.
Thin market: A market in which trading volume is low and in which consequently bid and asked quotes are wide and the liquidity of the instrument traded is low. Condition of very little stock to buy or sell. Illiquid.
Thinly traded: Infrequently traded.
Third market: Exchange-listed securities trading in the O.T.C. market.
Three-phase DDM: A version of the dividend discount model which applies a different expected dividend rate depending on a company's life-cycle phase, growth phase, transition phase, or maturity phase.
Threshold for refinancing: The point when the weighted average coupon of an M.B.S. 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 M.B.S. is 2% or more above currently available mortgage rates.
Throughput agreement: An agreement to put a specified amount of product per period through a particular facility. For example, an agreement to ship a specified amount of crude oil per period through a particular pipeline.
Tick: Refers to the minimum change in price a security can have, either up or down. Related: point.
Ticker tape: Used in the context of general equities. Computerized device that relays to investors around the world the stock symbol and the latest price and volume on securities as they are traded.
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: S.E.C.-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).
Tight market: A tight market, as opposed to a thin market, is one in which volume is large, trading is active and highly competitive, and consequently spreads between bid and ask prices are narrow.
Tight: Used in the context of general equities. In-line or extremely close (+/- 1/8) to the inside market or last sale in a stock. On the money.
Tiki: Used for listed equity securities. Tick of Dow Jones Industrial 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 order: Used in the context of general equities. Order which becomes a market or limited price order or is cancelled at a specific time.
Time premium: Also called time value, the amount by which the 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.
Times-interest-earned ratio: Earnings before interest and tax, divided by interest payments.
Time to maturity: The time remaining until a financial contract expires. Also called time until expiration.
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 till expiration?
Time value of an option: The portion of an option's premium that is based on the amount of time remaining until the expiration date of the option contract, and that the underlying components that determine the value of the option may change during that time. Time value is generally equal to the difference between the premium and the intrinsic value. Related: in-the-money.
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-weighted rate of return: Related: Geometric mean return.
Timing option: For a Treasury Bond or note futures contract, the seller's choice of when in the delivery month to deliver.
Tired: Used in the context of general equities. Has been strong for a while and will probably fall due to increased supply at current price level (due to profit taking, technical analysis, etc.). Heavy.
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.
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 S.E.C. and other agencies to explain his intentions and notify the acquiree. See: Rule 13d.
Tolling agreement: An agreement to put a specified amount of raw material per period through a particular processing facility. For example, an agreement to process a specified amount of alumina into aluminum at a particular aluminum plant.
Tom next: In the interbank market in Eurodollar deposits and the foreign exchange market, the value (delivery) date on a Tom next transaction is the next business day. Refers to "tomorrow next."
Tombstone: Advertisement listing the underwriters to a security issue.
Top: Used in the context of general equities. Indicating the higher price one is willing to pay for a stock in his order; implies a not held order.
Top-down equity management style: A management 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 the specific securities within the favored sectors.
Top heavy: Used in the context of general equities. At a price level where supply is exceeding demand. See: resistance level.
Topping out: Used in the context of general equities. Term 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.
T.S.E. 100 (Toronto Stock Exchange 100 index): Canadian form of a Dow Jones Industrial index.
Total: Used in the context of general equities. Complete amount of buy or sell interest, versus having more behind it. See: partial.
Total asset turnover: The ratio of net sales to total assets.
Total debt to equity ratio: A capitalization ratio comparing current liabilities plus long-term debt to sharesholders' 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 UK.
Touch, the: Mainly applies to international equities. Inside market in London terminology.
Tough on price: Used in the context of general equities. Firm price mentality at which one wishes to transact stock, often at a discount/premium that is not available at the time.
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. In the agreement, there is a provision that 'B' cannot sell the 1 million shares for 60-days. In addition, the agreement 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 that 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 the sell short or buying 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. However, 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 their compensation for bad performance in a division they have no control over.
Trade: A verbal (or electronic) transaction involving one party buying a security from another party. Once a trade is consummated, it is considered "done" or final. Settlement occurs 1-5 business days later.
Trade acceptance: Written demand that has been accepted by an industrial company to pay a given sum at a future date. Related: banker's acceptance.
Trade away: Used in the context of general equities. Trade execution by another broker/dealer.
Trade credit: Credit granted by a firm to another firm for the purchase of goods or services.
Trade date: In an interest rate swap, the date that the counterparties commit to the swap. Also, the date on which a trade occurs. Trades generally settle (are paid for) 1-5 business days after a trade date. With stocks, settlement is generally 3 business days after the trade. For equities, the day on which a security or a commodity future trade actually takes place. 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 draft: A draft addressed to a commercial enterprise. See: draft.
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Trade flat: Used in the context of general equities. For convertibles, trade without accrued interest, preferred stock always "trades flat" as do bonds on which interest is in default or is in doubt. For general, trade in and out of a position at the same price, neither making a profit nor taking a loss.
"Trade me out": Used for listed equity securities. 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: Used in the context of general equities. Aggressive trading posture of immediately giving a bid or offer to a salesman without checking the floor conditions (listed), dealer depth (O.T.C.) or customer interest.
Trade on top of: Trade at a narrow or no spread in basis points relative to some other bond yield, usually Treasury bonds.
Trade house: A firm which deals in actual commodities.
Traders: Persons who take positions in securities and their derivatives with the objective of making profits. Traders can make markets by trading the flow. When they do that, their objective is to earn the bid/ask spread. Traders can also be of the sort who take proprietary positions whereby they seek to profit from the directional movement of prices or spread positions.
Trades by appointment: Used in the context of general equities. Very difficult to trade due the stock's illiquidity.
Trading: Buying and selling securities.
Trading costs: Costs of buying and selling marketable securities and borrowing. Trading costs include commissions, slippage, and the bid/ask spread. See: transaction costs.
Trading halt: Trading of a stock, bond, option or futures contract can be halted by an exchange while news is being broadcast about the security. 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: Used in the context of general equities. Long range direction of a security or commodity future price, charted by drawing a line connecting the highest prices the security has reached and another line connecting the lowest prices where the security has traded over the same timeframe. See: technical analysis.
Trading posts: The posts on the floor of a stock exchange where the specialists stand and securities are traded.
Trading volume: The number of shares transacted every day. Since 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.
Trading range: The difference between the high and low prices traded during a period of time; with commodities, the high/low price limit established by the exchange for a specific commodity for any one day's trading.
Traditional view (of dividend policy): An argument that "within reason," investors prefer large dividends to smaller dividends because the dividend is sure but future capital gains are uncertain.
Tranche: One of several related securities offered at the same time. Tranches from the same offering usually have different risk, reward, and/or maturity characteristics.
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 transaction costs, Information costs, search costs.
Transaction exposure: Risk to a firm with known future cash flows in a foreign currency, arises from possible changes in the exchange rate. Related: translation exposure.
Transaction loan: A loan extended by a bank for a specific purpose. In contrast, lines of credit and revolving credit agreements involve loans that can be used for various purposes.
Transaction demand (for money): The need to accommodate a firm's expected cash transactions.
Transactions motive: A desire to hold cash for the purpose of conducting cash based transactions.
Transaction tax: Mainly applies to international equities. Taxes on each transaction sometimes charged by foreign governments.
Transfer agent: Individual or institution appointed by a company to look after the transfer of securities.
Transfer price: The price at which one unit of a firm sells goods or services to another unit of the same firm.
Transferable put right: An option issued by the firm to its shareholders to sell the firm one share of its common stock at a fixed price (the strike price) within a stated period (the time to maturity). The put right is "transferable" because it can be traded in the capital markets.
Transition phase: A phase of development in which the company's earnings begin to mature and decelerate to the rate of growth of the economy as a whole. Related: 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.
Treasurer: The corporate officer responsible for designing and implementing many of the firm's financing and investing activities.
Treasurer's check: A check issued by a bank to make a payment. Treasurer's checks outstanding are counted as part of a bank's reservable deposits and as part of the money supply.
Treasuries: Related: Treasury securities.
Treasury: U.S. Department of the Treasury which issues all Treasury bonds, notes and bills as well as overseeing agencies. Also, the department within a corporation that oversees the financial operations including the issuance of new shares.
Treasury bills: Debt obligations of the U.S. Treasury that have maturities of one year or less. Maturities for T-bills are usually 91 days, 182 days, or 52 weeks.
Treasury bonds: Debt obligations of the U.S. Treasury that have maturities of 10 years or more.
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 ": Used in the context of general equities. "My bid or offer is not firm, but is subject to a confirmation between other parties and to market changes."
Trend: The general direction of the market.
Treynor Index: A measure of the excess return per unit of risk, where excess return is defined as the difference between the portfolio's return and the risk-free rate of return over the same evaluation period and where the unit of risk is the portfolio's beta.
Triangular arbitrage: Striking offsetting deals among three markets simultaneously to obtain an arbitrage profit.
Trin: Used in the context of general equities. Short term trading index which 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 faster or slower 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 witching hour: The four times a year that the S&P futures contract expires at the same time as the S&P 100 index option contract and option contracts on individual stocks. It is the last trading hour on the third Friday of March, June, September, and December, when stock options, futures on stock indexes, and options on these futures expire concurrently. Massive trades in index futures, options, and underlying stock by hedge strategists and arbitrageurs cause abnormal activity (noise) and volatility.
Trough: The transition point between economic recession and recovery.
True interest cost: For a security such as commercial paper that is sold on a discount basis, true interest cost is the coupon rate required to provide an identical return assuming a coupon-bearing instrument of like maturity that pays interest in arrears.
True lease: A contract that qualifies as a valid lease agreement under the Internal Revenue code.
Trust deed: Agreement between trustee and borrower setting out terms of bond.
Trust receipt: Receipt for goods that are to be held in trust for the lender.
TT&L account: Treasury tax and loan account at a bank.
Turn: Used in the context of general equities. Reversal, unwind.
Turnaround: Securities bought and sold for settlement on the same day. Also refers to a situation where a firm that has been performing poorly changes its financial course and improves its performance.
Turnaround time: Time available or needed to effect a turnaround.
Turnkey construction contract: A type of construction contract under which the construction firm is obligated to complete a project according to prespecified criteria for a price that is fixed at the time the contract is signed.
Turnover: For mutual funds, a measure of trading activity during the previous year, expressed as a percentage of the average total assets of the fund. A turnover ratio 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, 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 S.E.C. has recently proposed that 12B-1 fees in excess of 0.25% be classed as a load. A true " no load" fund has neither a sales charge nor 12b-1 fee.
12b-1 funds: Mutual funds that do not charge an upfront or back-end commission, but instead take out up to 1.25% of average daily fund assets each year to cover the costs of selling and marketing shares, an arrangement allowed by the SEC's Rule 12b-1 (passed in 1980).
Two dollar broker: Used for listed equity securities. Floor broker of the N.Y.S.E., who executes orders for other brokers (risk arbitrage) 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. Also, a situation where customers or market-makers are lined up on both sides (buy and sell) of the stock.
Two-state option pricing model: An option pricing model in which the underlying asset can take on only two possible (discrete) values in the next time period for each value it can take on in the preceding time period. Also called the binomial option pricing model.
Two-tier bid: Often used in risk arbitrage. Takeover bid where the acquirer offers to pay more for the shares needed to gain control than for the remaining shares, or the same price but at different points in the merger period; contrasts with any-or-all bid.
Two-tier tax system: A method of taxation in which the income going to shareholders is taxed twice.
Type: The classification of an option contract as either a put or a call.

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