Copy of `New York Times - Business and Finance Glossary`

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New York Times - Business and Finance Glossary Category: Economy and Finance Date & country: 11/09/2007, USA Words: 2680

Takeover
General term referring to transfer of control of a firm from one group of shareholder's to another group of shareholders.

Taking a view
A London expression for forming an opinion as to where market prices are headed and acting on it.

Taking delivery
Refers to the buyer's actually assuming possession from the seller of the asset agreed upon in a forward contract or a futures contract.

Tandem programs
Under Ginnie Mae, mortgage funds provided at below-market rates to residential mortgage 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 i nclude 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

TANs (tax anticipation notes)
Tax anticipation notes issued by states or municipalities to finance current operations in anticipation of future tax receipts.

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 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.

Targeted repurchase
The firm buys back its own stock from a potential bidder, usually at a substantial premium, to forestall a takeover attempt.

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 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 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 free acquisition
A merger or consolidation in which 1) the acquirer's tax basis in each asset whose ownership is transferred in the transaction is generally the same as the 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 swap
Swapping two similar bonds to receive a tax benefit.

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-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-timing option
The option to sell an asset and claim a loss for tax purposes or not to sell the asset and defer the capital gains tax.

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.

TBA (to be announced)
A contract for the purchase or sale of a MBS to be delivered at an agreed-upon future date but does not include a specified pool number and number of pools or precise amount to be delivered.

Technical analysis
Security analysis that seeks to detect and interpret patterns in past 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.

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.

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.

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.

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 depicted as a yield curve. Harvey shows that inverted term structures (long rates below short rates) have preceded every recession over the past 30 years.

Term to maturity
The time remaining on a bond's life, or the date on which the debt will cease to exist and the borrower will have completely paid off the amount borrowed. 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 services for cash or credit.

Terms of trade
The weighted average of a nation's export prices relative to its import prices.

The Exchange
A nickname for the New York stock exchange. Also known as the Big Board. More than 2,000 common and preferred stocks are traded. The exchange is the oldest in the United States, founded in 1792, and the largest. It is located on Wall Street in New York City.

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.

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.

Thinly traded
Infrequently traded.

Third market
Exchange-listed securities trading in the OTC 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 WAC 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 WAC of the MBS is 2% or more above currently available mortgage rates.

Throughput agreement
An agreement to put a specified amount of product per period through a particular facility. For example, an agreement to ship a specified amount of crude oil per period through a particular pipeline.

Tick
Refers to the minimum change in price a security can have, either up or down. Related: point.

Tick indicator
A market indicator based on the number of stocks whose last trade was an uptick or a downtick. Used as an indicator of market sentiment or psychology to try to predict the market's trend.

Tick-test rules
SEC-imposed restrictions on when a short sale may be executed, intended to prevent investors from destabilizing the price of a stock when the market price is falling. A short sale can be made only when either (1) the sale price of the particular stock is higher than the last trade price (referred to as an uptick trade) or (2) if there is no change in the last trade price of the particular stock, the previous trade price must be higher than the trade price that preceded it (referred to as a zero …

Tight market
A tight market, as opposed to a thin market, is one in which volume is large, trading is active and highly competitive, and spreads between bid and ask prices are narrow.

Tilted portfolio
An indexing strategy that is linked to active management through the emphasis of a particular industry sector, selected performance factors such as 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 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.

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 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.

Times-interest-earned ratio
Earnings before interest and tax, divided by interest payments.

Timing option
For a Treasury Bond or note futures contract, the seller's choice of when in the delivery month to deliver.

Tobin's Q
Market value of assets divided by replacement value of assets. A Tobin's Q ratio greater than 1 indicates the firm has done well with its investment decisions.

Tolling agreement
An agreement to put a specified amount of raw material per period through a particular processing facility. For example, an agreement to process a specified amount of alumina into aluminum at a particular aluminum plant.

Tom next
In the interbank market in 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-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.

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 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 interest, and any capital gain/loss) over some i nvestment horizon.

Total revenue
Total sales and other revenue for the period shown. Known as 'turnover' in the UK.

Tracking error
In an indexing strategy, the difference between the performance of the benchmark and the replicating portfolio.

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 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.

Trade debt
Accounts payable.

Trade draft
A draft addressed to a commercial enterprise. See:draft.

Trade house
A firm which deals in actual commodities.

Trade on top of
Trade at a narrow or no spread in basis points relative to some other bond yield, usually Treasury bonds.

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.

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.