Trading Glossary

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12b-i 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 12b-I (passed in 1980).

Tactical assest allocation (TAA)

An asset allocation strategy that allows active departures from the normal asset mix based upon rigorous objective measures of value.

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. Related: Intangible asset

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 descriptors

In the model for calculating fundamental beta, ratios in the market variability risk index which rely on market-related data.

Technician

Related: Technical analysts

Tender

To offer for delivery against futures.

Term bonds

Often referred to as bullet-maturity bonds or simply bullet bonds, bonds whose principal is payable at maturity. Related: Serial bonds

Term repo

A repurchase agreement with a term of more than one day.

Term structure of interest rates

The relationship between the yields on otherwise comparable securities with different maturities, often depicted as a yield curve.

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.

Term trust

A closed-end fund that has a fixed termination or maturity date.

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.

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.

Tick

Refers to change in price, either up or down. Related: Point

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 not 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).

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

Related: Certificate of deposit

Time premium

Also called time value, the amount by which the option price exceeds its intrinsic value.

Time value

The market value of an option minus its intrinsic value; that is, the difference between the option premium and the amount, if any, that the option is in-the-money. Related: In-the-Money

Time value of an option

Related: Time premium

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.

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 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 investment horizon.

Tracking error

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

Trade date

In an interest rate swap, the date that the counterparties commit to the swap.

Trade house

A firm which deals in actual commodities.

Tranche

One of several related securities offered at the same time.

Transactions costs

Related: Round-trip transactions costs, Information costs, Search costs

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

Treasuries

Related: Treasury securities

Treasury bills

Debt obligations of the U.S. Treasury that have maturities of one year or less.

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.

Trend

The general direction of the market.

Treynor Index

A measure of the excess return per unit or 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. Related: Sharpe Index

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.