T+1, T+2, T+3
Abbreviations that refer to the settlement date of security transactions. The T stands for the day the transaction takes place. The numbers 1, 2 and 3 denote how many days after the transaction date the settlement or the transfer of money and security ownership takes place.

T-bill/T-bond
See treasury bill, treasury bond.

TAA
See tactical asset allocation.

Tactical asset allocation (TAA)
Short-term deviation from a strategic asset allocation to exploit predicted short-term relative movements in markets with the aim of generating excess return relative to a benchmark (typically, the strategic asset allocation). (See also strategic asset allocation.)

Tactical asset allocation overlay
Portfolio management technique which gains exposure to asset classes through derivatives rather than physical securities. Its economic exposure is typically much larger than the assets of the overlay portfolio, which are used to fund margin payments and close off positions. As a result, it is used as an overlay to a larger fund to adjust its asset allocation with the aim of taking advantage of short-term movements and opportunities in
the markets.

Tail risk
A form of portfolio risk that arises when the possibility that an investment will move more than three standard deviations from the mean or expected return, is greater than what is shown by a normal distribution.

Takeover
Corporate action where one company makes a bid to acquire another. If the target company is publicly traded, the acquiring company will make an offer for the outstanding shares.

TALF
See term asset-backed securities loan facility.

Target firm
Firm that has been targeted by another firm for a takeover.

TARP
See Troubled Asset Relief Program.

Technical analysis T
Attempt to predict share price movements on the basis of past patterns. (See also chartism.)

Tender
Method of issuing securities whereby investors are invited to bid, subject to a minimum price. The allocation of the securities is made according to the prices bid.

Tenor
Length of a swap contract.

TER
See total expense ratio.

Term (of a bond)
Period remaining until the final payment.

Term asset-backed securities loan facility (TALF)
Second economic measure implemented by the Federal Reserve in the United States, in which US$800 billion was issued to Congress to remove toxic securities from US banks’ balance sheets during the 2008 credit crunch. (See also Troubled Asset Relief Programme.)

Term deposit
Bank deposit for a fixed period of time. The interest rate may be fixed at outset, or variable.
term structure of interest rates Yield curve displaying the relationship between spot rates of zero coupon securities and their term to maturity.

Thin market
Market with few bid and ask offers. The market is characterised by low liquidity, high spreads, and high volatility. Also known as a narrow market.

Tier 1 capital
Describes the capital adequacy of a bank. Tier 1 capital is core capital that includes equity capital and disclosed reserves.

Tier 2 capital
Describes the capital adequacy of a bank. Tier 2 capital is secondary bank capital that includes items such as undisclosed reserves, general loss reserves and subordinated term debt.

Tiger economy
Nickname given to the economies of Southeast Asia encompassing markets such as Indonesia, Singapore, Malaysia, Thailand, South Korea and China.

Tilt
Adoption of a particular view on a sector by overweighting or underweighting that sector relative to the portfolio benchmark (e.g. a portfolio which was overweight resource shares and underweight industrials would be described as having a tilt towards resources and away from industrials).

Time value (of an option)
Part of a traded option’s value that can be attributed to the possibility of future market movements adding to the value of the option. It is reflected by the difference between the traded price of the option and the intrinsic value of the option. (See also intrinsic value.)

Time-weighted rate of return
Rate of return on an asset or portfolio that adjusts for the effect of cash flows. The time-weighted return can be used to compare portfolio performances against each other and against market indices. (See also money-weighted rate of return.)

TIPS
See Treasury Inflation Protection Securities.

Tokyo Stock Price Index (TOPIX)
Index measuring the share prices of selected companies listed on the Tokyo Stock Exchange.

Top-down
Approach to investment analysis which starts from macroeconomic factors (GDP growth, interest rates, inflation, etc.) and business cycle analysis to identify a portfolio distribution across asset classes, then a country/currency mix, a sector distribution and ultimately a stock selection. It is the converse of the
bottom-up approach. (See also bottom-up.)

TOPIX
See Tokyo Stock Price Index.

Top quartile
Quartile ranking that is in the top 25% of returns. (See also bottom quartile.)

Toronto Stock Exchange (TSX)
Largest stock exchange in Canada, historically home to a large number of natural resource companies.

Total expense ratio
Total costs experienced by investors in an investment fund, divided by the total asset value of the fund. The total costs include management fees (asset-based or performance-related), transactions costs, broking fees and auditor fees, among others.

Total rate of return swap (TRORS)
Contract in which one party receives interest and/or dividend payments plus any capital gains and losses over the payment period on a reference asset (or index, or portfolio of assets), while the other receives a specified fixed or floating cash flow unrelated to the credit-worthiness of the reference asset. (Payments are usually based on the same notional amount.)

Total return
Overall return on a stock or portfolio taking into account changes in capital values and income earned.

Toxic asset
Asset for which for which the secondary market has disappeared, on the basis that the asset is expected to incur significant future losses. Investors holding toxic assets may be forced to sell these at large discounts to book value, in order to raise liquidity and stabilise their balance sheets.

Tracking error
Measure of the variability of investment returns relative to a benchmark or index. It is usually expressed as the annualised standard deviation of relative returns. Can be expressed as either ex-post, which is simply the historical tracking error, or ex-ante, which is a forward-looking estimate of the future tracking error. (See also ex-post, ex-ante.)

Tranche
Packages created when a bond’s cash flows are repackaged as a collateralised debt obligation (CDO) or a portfolio of securities is repackaged as a collateralised mortgage obligation (CMO). Each tranche has a different risk/return profile, and the tranches trade separately from one another.

Transaction costs
Costs incurred when buying or selling securities. These include brokers’ commissions and spreads (the difference between the price the dealer paid for a security and the price he or she can sell it for), market impact (security price movements brought about by trading activity) and opportunity costs.

Transition manager
Manager whose specific role is to transition one portfolio of assets to another whilst minimising direct and indirect costs.

Treasury bill
Bond issued by a government with a maturity of one year or less. Also called a T-bill in the US.

Treasury bond
Bond issued by a government — for example, US treasuries.

Treasury Inflation-Protected Securities (TIPS)
Index-linked (i.e. inflation-linked) bonds issued by the US government.

Trend analysis
Type of technical analysis used to determine or locate significant trends in a security.

Triple bottom line
Holistic approach to measuring a company’s performance on environmental, social
and economic issues. The triple bottom line focuses companies not just on the economic value they add but also on the environmental and social value they add or destroy.

Troubled Asset Relief Program (TARP)
Initial economic measure implemented by the Federal Reserve in the United States in which US$700 million was issued to Congress to remove toxic mortgage- backed securities from US banks’ balance sheets during the 2008 credit crunch. (See also term asset-backed securities loan facility.)

Trust deed
Most UK pension schemes are formally established as trusts, and the trust deed is the governing document specific to each scheme. The trust deed will set out the trustees’ investment powers and any specific restrictions on permitted investments, etc.

Trustee
Individual or organisation responsible for the management and administration of a trust, for example, a pension plan, on behalf of the beneficiaries of that trust.

Turnaround
Situation where a company that has had poor performance for an extended period of time experiences a reversal of fortune.

Turnover
Measure of the level of trading in a market or portfolio. Usually expressed as the sum of the total value of purchases and sales in a period as a percentage of the portfolio value.

Two and twenty
Fee structure usually employed by hedge fund and some private equity managers, with a base fee of 2% of the fund’s asset value plus a fee of 20% of the outperformance of the fund.

Technical Analysis
Anticipating future price movement using historical prices, trading volume, open interest, and other trading data to study price patterns.

Tick
The smallest allowable increment of price movement for a contract. Also referred to as minimum price fluctuation.

Time Limit Order
A customer order that designates the time during which it can be executed.

Time and Sales Data
Part of the exchange trade flow recording system consisting of an on-line graphic service that transmits price and time information throughout the day.

Time-Stamped
Part of the order-routing process in which the time of day is stamped on an order. An order is time-stamped when it is (1) received on the trading floor, and (2) completed.

Time Value
The amount of money option buyers are willing to pay for an option in the anticipation that, over time, a change in the underlying futures price will cause the option to increase in value. In general, an option premium is the sum of time value and intrinsic value. Any amount by which an option premium exceeds the option’s intrinsic value can be considered time value. Also referred to as extrinsic value.

Trade Balance
The difference between a nation’s imports and exports of merchandise.

Trading Limit
See Position Limit.

Treasury Bill
See U.S. Treasury Bill.

Treasury Bond
See U.S. Treasury Bond.

Treasury Note
See U.S. Treasury Note.

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