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

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.

Trading paper
CDs purchased by accounts that are likely to resell them. The term is commonly used in the Euromarket.

Trading posts
The posts on the floor of a stock exchange where the specialists stand and securities are traded.

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.

Tranche
One of several related securities offered at the same time. Tranches from the same offering usually have different risk, reward, and/or maturity characteristics.

Transaction demand (for money)
The need to accommodate a firm's expected cash transactions.

Transaction exposure
Risk to a firm with known future cash flows in a foreign currency that arises from possible changes in the exchange rate. Related:translation exposure.

Transaction loan
A loan extended by a bank for a specific purpose. In contrast, lines of credit and revolving credit agreements involve loans that can be used for various purposes.

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.

Transactions motive
A desire to hold cash for the purpose of conducting cash based transactions.

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 depostits and as part of the money supply.

Treasuries
Related: treasury securities.

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.

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.

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.

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, 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.

Turnaround
Securities bought and sold for settlement on the same day. Also, when 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
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. Finance: The number of times a given asset, such as inventory, is replaced during the accounting period, usually a year. Corporate: The ratio of annual sales to net worth, representing the extent to which a company can growth without outside capital. Markets…

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.

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 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.

Unbiased predictor
A theory that spot prices at some future date will be equal to today's forward rates.

Unbundling
When a multinational firm unbundles its transfer of funds into separate flows for specific purposes. See: bundling.

Uncovered call
A short call option position in which the writer does not own shares of underlying stock represented by his option contracts. Also called a 'naked' call, it is much riskier for the writer than a covered call, where the writer owns the underlying stock. If the buyer of a call exercises the option to call, the writer would be forced to buy the stock at market price.

Uncovered put
A short put option position in which the writer does not have a corresponding short stock position or has not deposited, in a cash account, cash or cash equivalents equal to the exercise value of the put. Also called 'naked' puts, the writer has pledged to buy the stock at a certain price if the buyer of the options chooses to exercise it. The nature of uncovered options means the writer's risk is unlimited.

Underfunded pension plan
A pension plan that has a negative surplus (i.e., liabilities exceed assets).

Underinvestment problem
The mirror image of the asset substitution problem, wherein stockholders refuse to invest in low-risk assets to avoid shifting wealth from themselves to the debtholders.

Underlying
The 'something' that the parties agree to exchange in a derivative contract.

Underlying asset
The asset that an option gives the option holder the right to buy or to sell.

Underlying security
Options: the security subject to being purchased or sold upon exercise of an option contract. For example, IBM stock is the underlying security to IBM options. Depository receipts: The class, series and number of the foreign shares represented by the depository receipt.

Underperform
When a security is expected to appreciate at a slower rate than the overall market.

Underpricing
Issue of securities below their market value.

Underwrite
To guarantee, as to guarantee the issuer of securities a specified price by entering into a purchase and sale agreement. To bring securities to market.

Underwriter
A party that guarantees the proceeds to the firm from a security sale, thereby in effect taking ownership of the securities. Or, stated differently, a firm, usually an investment bank, that buys an issue of securities from a company and resells it to investors.

Underwriting
Acting as the underwriter in a purchase and sale.

Underwriting fee
The portion of the gross underwriting spread that compensates the securities firms that underwrite a public offering for their underwriting risk.

Underwriting income
For an insurance company, the difference between the premiums earned and the costs of settling claims.

Underwriting syndicate
A group of investment banks that work together to sell new security offerings to investors. The underwriting syndicate is led by the lead underwriter. See also: lead underwriter.

Underwritten offering
A purchase and sale.

Undiversifiable risk
Related: Systematic risk

Unemployment rate
The ratio of the number of people classified as unemployed to the total labor force.

Unfunded debt
Debt maturing within one year (short-term debt). See: funded debt.

Unilateral transfers
Items in the current account of the balance of payments of a country's accounting books that corresponds to gifts from foreigners or pension payments to foreign residents who once worked in the country whose balance of payments is being considered.

Unique risk
Also called unsystematic risk or idiosyncratic risk. Specific company risk that can be eliminated through diversification. See: diversifiable risk and unsystematic risk.

Unit benefit formula
Method used to determine a participant's benefits in a defined benefit plan by multiplying years of service by the percentage of salary.

Unit investment trust
Money invested in a portfolio whose composition is fixed for the life of the fund. Shares in a unit trust are called redeemable trust certificates, and they are sold at a premium above net asset value.

Universal life
A whole life insurance product whose investment component pays a competitive interest rate rather than the below-market crediting rate.

Unleveraged beta
The beta of an unleveraged required return (i.e. no debt) on an investment when the investment is financed entirely by equity.

Unleveraged required return
The required return on an investment when the investment is financed entirely by equity (i.e. no debt).

Unlimited liability
Full liability for the debt and other obligations of a legal entity. The general partners of a partnership have unlimited liability.

Unmatched book
If the average maturity of a bank's liabilities is less than that of its assets, it is said to be running an unmatched book. The term is commonly used with the Euromarket. Term also refers to the condition when a firm enters into OTC derivatives contracts and chooses to hedge that risk by not making trades in the opposite direction to another financial intermediary. In this case, the firm with an unmatched book hedges its net market risk with futures and options, usually. Related expressions: op…

Unseasoned issue
Issue of a security for which there is no existing market. See: seasoned issue.

Unsecured debt
Debt that does not identify specific assets that can be taken over by the debtholder in case of default.

Unsterilized intervention
Foreign exchange market intervention in which the monetary authorities have not insulated their domestic money supplies from the foreign exchange transactions.

Unsystematic risk
Also called the diversifiable risk or residual risk. The risk that is unique to a company such as a strike, the outcome of unfavorable litigation, or a natural catastrophe that can be eliminated through diversification. Related: Systematic risk

Upstairs market
A network of trading desks for the major brokerage firms and institutional investors that communicate with each other by means of electronic display systems and telephones to facilitate block trades and program trades.

Uptick
A term used to describe a transaction that took place at a higher price than the preceding transaction involving the same security.

Uptick trade
Related:Tick-test rules

Utility
The measure of the welfare or satisfaction of an investor or person.

Utility function
A mathematical expression that assigns a value to all possible choices. In portfolio theory the utility function expresses the preferences of economic entities with respect to perceived risk and expected return.

Utility value
The welfare a given investor assigns to an investment with a particular return and risk.

Value additivity principal
Prevails when the value of a whole group of assets exactly equals the sum of the values of the individual assets that make up the group of assets. Stated differently, the principle that the net present value of a set of independent projects is just the sum of the net present values of the individual projects.

Value date
In the market for Eurodollar deposits and foreign exchange, value date refers to the delivery date of funds traded. Normally it is on spot transactions two days after a transaction is agreed upon and the future date in the case of a forward foreign exchange trade.

Value dating
Refers to when value or credit is given for funds transferred between banks.

Value manager
A manager who seeks to buy stocks that are at a discount to their 'fair value' and sell them at or in excess of that value. Often a value stock is one with a low price to book value ratio.

Value-added tax
Method of indirect taxation whereby a tax is levied at each stage of production on the value added at that specific stage.

Value-at-Risk model (VAR)
Procedure for estimating the probability of portfolio losses exceeding some specified proportion based on a statistical analysis of historical market price trends, correlations, and volatilities.

Vanilla issue
A security issue that has no unusual features.

Variable
A value determined within the context of a model. Also called endogenous variable.

Variable annuities
Annuity contracts in which the issuer pays a periodic amount linked to the investment performance of an underlying portfolio.

Variable cost
A cost that is directly proportional to the volume of output produced. When production is zero, the variable cost is equal to zero.

Variable life insurance policy
A whole life insurance policy that provides a death benefit dependent on the insured's portfolio market value at the time of death. Typically the company invests premiums in common stocks, and hence variable life policies are referred to as equity-linked policies.

Variable price security
A security, such as stocks or bonds, that sells at a fluctuating, market-determined price.

Variable rate CDs
Short-term certificate of deposits that pay interest periodically on roll dates. On each roll date, the coupon on the CD is adjusted to reflect current market rates.

Variable rate loan
Loan made at an interest rate that fluctuates based on a base interest rate such as the Prime Rate or LIBOR.

Variable rated demand bond (VRDB)
Floating rate bond that can be sold back periodically to the issuer.

Variance
A measure of dispersion of a set of data points around their mean value. The mathematical expectation of the squared deviations from the mean. The square root of the variance is the standard deviation.

Variance rule
Specifies the permitted minimum or maximum quantity of securities that can be delivered to satisfy a TBA trade. For Ginnie Mae, Fannie Mae, and Feddie Mac pass-through securities, the accepted variance is plus or minus 2.499999 percent per million of the par value of the TBA quantity.