Glossary of Terms

Same as Treasury Bills.

Same as Treasury Bonds.

Same as Treasury Notes.

A measure of statistical significance. The t-statistic measures the likelihood that the observed data under review might have arisen randomly (rather than as a result of the proposed statistical relationship).

Statistics. The extreme upper or lower end of a distribution.

An offer made to the shareholders of a company to acquire their shares (either cash or in exchange for shares in the offering company) in the hope of receiving sufficient acceptances to obtain voting control of the target company.

A self-regulatory body in the UK which administers the City Code, comprising representatives from various financial regulatory bodies and interested groups from the City.

An asset which, in contrast to an intangible asset, has a physical or material existence. Tangible assets are perceptible by touch, for example, land, buildings and vehicles.

(TNW). The book value of equity, adjusted to exclude intangible fixed assets.

Funds transfer. Abbreviation for Trans-European Automated Real-time Gross Settlement Express Transfer.

TARGET 2 is the payment system which started in November 2007 to replace TARGET. TARGET 2 (Trans-European Automated Real-time Gross Settlement Express Transfer System) is an interbank payment system for the real-time processing of cross-border transfers throughout the EU. Strictly speaking it is not itself a funds transfer system, rather it links existing national payment systems.

Banking. 1.Average collected balance that must be maintained to compensate a bank for all the services provided to the company. Targets are often set monthly and monitored daily.

2. The minimum amount that needs to be maintained in each sub-account under a target balancing scheme.

A cash concentration technique whereby all account balances are physically transferred into a nominated account leaving a predetermined amount in the sub-accounts. Also know as target concentration or sweeping.

Banking. All funds above a target balance level are transferred to the concentration account.

Pension funding. Depending on the funding method being used, this will generally be the fund of assets equal to the value of past service liabilities allowing for projected earnings.

In relation to options, the same as Vega.

1. Compulsory financial contribution imposed by a government to raise revenue, levied on the income or property of persons or organisations, on the production costs or sale price of goods and services.

2. To levy a tax.

The use of legal means to reduce tax liabilities or to achieve favourable tax timing differences.

See Imputation system.

The use of illegal means to reduce tax liabilities.

A low tax environment used to shelter income and gains from taxation or to defer taxation.

VAT. The date on which a supply of goods or services is treated as taking place for VAT purposes.

A deduction allowed by law in calculating a tax liability.

1. The risk that transactions or business relationships may have unforeseen adverse tax consequences. For example, giving rise to additional tax costs.

2. The risk that the administration of tax may be more costly - or otherwise more burdensome - than foreseen.

Tax risk may arise from existing tax laws and practice, or from changes in tax laws and practice.

1. The benefit to a taxpayer of the tax deductibility of certain business expenses, thus reducing their taxable income and their tax bill.
For example, borrowing costs including debt interest are normally tax-deductible. This gives rise to tax shield benefits and reduces the after-tax cost of debt for corporate borrowers.

2. More narrowly, the total present value of all of the expected future related cash flow benefits arising from the use of debt.

(TWDV). Expenditure which has not yet had tax relief by way of capital allowances, but which will be tax relieved in future periods.

Also known as Taxable equivalent yield. Adjusting method that allows tax-free income or yield to be compared to gross taxable income before any taxes are deducted in order to determine how much taxable income/yield is required to equal the income or yield generated by a tax-free investment.

Same as Taxable equivalent income.

VAT. The people responsible for collecting VAT and paying it to HMRC.

UK Tax. Supplies of goods or services in the UK, acquisitions of goods in the UK from other member states; Importation of goods into the UK from outside the European Union.

A statement setting out the entitlement of a UK taxpayer in relation to the level of service and fairness to expect from HMRC.

Transmission Control Protocol.

The mathematical and judgemental review of historic price data, often for the purpose of predicting future prices.

Pensions. According to the relevant Code of Practice:
'Technical provisions is the name given to an actuarial valuation of the scheme’s benefits earned to date using a method and assumptions chosen prudently by the trustees after taking actuarial advice and with the agreement of the employer.'

Funds transfer. See Repetitive transfers.

Also known as a bid bond.

An offer of a company's securities at a uniform price (above a specified minimum) that is determined by bids received such that all the securities are subscribed for.

A group of banks which are invited to bid competitively for financial instruments on an auction basis. The bid offers are collected by the tender panel agent, who then conveys them to the borrower.

A contingent contract providing forward exchange cover for a company tendering competitively for a contract, which is completed only if the company's bid is successful. Provided by ECGD.

In relation to a financial instrument evidencing a debt obligation, the remaining time or the original time until the principal is repayable to the holder.

Deposits, including certificates of deposit, for fixed periods of time.

A bank advance that is contractually agreed for a specified period of time, normally exceeding one year.

Same as 'term structure of interest rates' and 'yield curve'.

Same as Yield curve.

UK Tax. Loss relief which applies when a company ceases to trade. The carry back provisions are extended to 36 months rather then 12 months.

Same as Variable currency.

Normally used to describe the basis on which a company sells its goods or services, typically referring to the credit and payment terms.

A statistical quantity calculated from observed quantities which we use to test the null hypothesis.

UK. Abbreviation for the Bank of England.

A non-statutory code of practice governing the conduct of takeovers in the UK, which is administred by the Takeover Panel.

Options analysis. The sensitivity of the market value of an option with respect to changes in the time to expiry of the option.

Tax. The loading up of a foreign subsidiary’s capital structure with interest bearing debt.
This has the effect - among other consequences - of transferring taxable profits from the foreign subsidiary to the parent.
(Because the subsidiary is paying a lot of debt interest to the parent, thus lowering the taxable profits of the subsidiary and increasing the profits of the parent.)

Thinly capitalised structures are apt to be challenged by the local tax authorities whose tax base is being eroded in this way.

The 'thin' part of the term 'thin capitalisation' refers to the amount of the equity injected into the subsidiary by the parent. The thin capitalisation tax rules may deem that the equity capital is too 'thin' compared with the related amount of debt which this equity is supporting.
The test for tax purposes of an acceptable proportion of equity (usually expressed as a debt:equity ratio) is one which would be acceptable to an external lender such as an independent bank, lending directly to the subsidiary.

A cash concentration technique where the balances of the sub-accounts are physically transferred in their totality into a nominated account each time the sub-accounts’ balances reach a predetermined threshold.

The minimum price movement in the market quotation for a traded financial instrument, for example financial futures. The tick value (or tick size) varies between different markets.

See Tick.

Abbreviation for Treasury Inflation-Indexed Securities.

Risk management. Intervals of time to repricing. In determining the risk associated with holding financial assets / liabilities it is necessary to determine the proportion of the total investment whose return / cost can be repriced at specific time intervals. Thus a floating rate instrument whose rate is reset every 6 months will be in the 6-month time bin.

Options analysis. The loss in Time value of an option or other derivative instrument, as its maturity approaches.

A type of interest-bearing account from which the depositor cannot withdraw funds in advance of an agreed upon time without incurring a penalty.

See Term deposits.

Draft that demands payment at a specified future date.

VAT. Determines which period a transaction falls within for VAT purposes.

A set of data recorded at successive periods of time.

A visual representation of a graph showing time on the horizontal axis and the size of the item on the vertical axis.

1. The component of an option’s total value which is related to the length of the unexpired maturity of the option, and which is additional to the Intrinsic value, if any.

2. See Time value of money.

The concept that money received now is worth more than the same amount of money to be received at some later time.
The time value of money is reflected in the charging of interest for the use of money, and in discounted cash flow analysis.

Abbreviation for Treasury Inflation-Protected Securities.

Abbreviation for Transport Layer Security.

Treasury Management System.

Abbreviation for Tangible Net Worth.

Transfer of a going concern.

A deal starting from tomorrow maturing the following day.

An advertisement recording terms and participants in a new securities issue, or financing.
So named because of its shape and relatively large size, when printed in a newspaper.

Law. A civil wrong or breach of a duty to another person, as defined in law. For example, negligence.

Accounting. Total accounting value of all long-term and short-term assets, minus any accumulated depreciation.

The sum of fixed costs plus variable costs.

Return on an investment taking into account reinvested income as well as capital appreciation.

A capital market swap in which one leg is based on the total return from another financial instrument (for example the dividends plus capital appreciation from an equity). The other leg is conventionally based on a floating reference interest rate, such as LIBOR.

(TSR). A measure of the total rate of return to shareholders for the period under review, based on:

1. The opening value of the shares;
2. Dividends received; and
3. The closing value of the shares.

The TSR is calculated as the Internal rate of return of these three items.

An investment fund whose aim is to track a particular investment index (for example the FTSE 100 index). One way of doing this is by replicating the index constituents in the investment portfolio of the tracker fund.
It can also be done by investing in a selected subset of the index, or by the use of appropriate derivative instruments.

A measure of the extent to which the performance of a tracker fund succeeds in matching the performance of the market or index being tracked.

1. Defined for tax purposes, the expression includes every trade, manufacture, adventure or concern in the nature of a trade.
2. More generally, trade normally involves the exchange of goods or services for reward.
3. In the context of market dealing, the term 'trade' is also used synonymously with 'deal'.

A draft accepted by a company constituting an unconditional and binding obligation on the part of the company to pay the draft at maturity.

Also know as transaction date. The date on which a transaction is executed following which settlement will occur on the agreed settlement date.

Government policy aimed at controlling the power of trade unions.

A name, word, symbol, or device that allows the trademark owner to dictate its use in identifying a product.

Where a company borrows or lends money for the purpose of the trade.

One part of a number of different securities that are issued by the same company at the same time. Such securities may differ in terms of risk, yield and/or (most commonly) maturity.

(TARGET). The TARGET system is defined as a payment system composed of one real-time gross settlement (RTGS) system in each of the 15 countries of the European Union (EU) and the European Central Bank (ECB) payment mechanism. The domestic RTGS systems and the ECB payment mechanism are interconnected according to common procedures (interlinking) to allow cross-border transfers throughout the EU to move from one system to another.

1. The act of obtaining and paying for an item or service. Also known as a deal or a trade. 2. The transmission and processing of an item of data.

The depository balances an organisation holds for its collection and disbursement activities.

Same as Trade date.

The risk of adverse changes in foreign exchange rates from the time a foreign currency transaction is entered into until it is settled.

Same as transaction exposure.

Same as Transaction exposure.

A desire to hold money to enable day-to-day transactions to be settled efficiently.

1. The sending (or movement) of funds or securities or of a right relating to funds or securities from one party to another by:

i. The conveyance of physical instruments/money; or
ii. Accounting entries on the books of a financial intermediary; or
iii. Accounting entries processed through a funds and/or securities transfer system.

The act of transfer affects the legal rights of the transferor, transferee and possibly third parties in relation to the money balance, security or other financial instrument being transferred.

2. In relation to risk management, a response to risk in which another party is paid - or otherwise induced - to accept the risk.

An individual or company that records, on behalf of a company, the sale and purchase of a company’s securities as well as maintaining detailed ownership records of the company’s shares and other registered securities. Sometimes called registrar in the USA.

(TOGC). VAT. The disposal of a business from one taxable person to another which continues in the same way before and after sale.

Tax. An area of taxation which examines the prices paid between related parties, usually companies.
Transfer pricing tax rules are designed to prevent related parties from shifting taxable profits between each other in such a way as to avoid tax.
The most important transfer pricing rule is that all transactions between related parties must be at 'arm's length' prices.

(If the transfer pricing tax rules did not exist, a parent company could, for example, overcharge its overseas subsidiaries for goods and services. This would reduce the taxable profits of the subsidiaries, were it not for tax transfer pricing adjustments.)

In the context of foreign exchange, the risk that a domestic currency cannot be converted into foreign currency, or vice versa.

A generic term covering funds transfer systems and exchange-for-value systems.

Pensions. The amount of the pension transfer payment which has to be made when an individual, or group of individuals, leaves one pension scheme and joins another (whether it is another company scheme, or some form of personal pension arrangement).

(TRN). Banking. The number that is part of the MICR line of a check or payable through draft that allows the depository bank to route the check back to the drawee bank.

Translation exposure refers to foreign exchange or currency risk. It is the risk of adverse effects in a firm’s reported financial statements, or related financial ratios or borrowing covenant compliance, resulting from changes in the rates at which foreign currency-denominated assets and liabilities are translated into the reporting currency. This applies most commonly to the translation of monetary assets and liabilities and to the consolidation of overseas subsidiaries into group financial statements.

Same as translation exposure.

Same as Translation exposure.

(TCP). A protocol that, in combination with Internet Protocol (IP), allows the transmission of data over networks. IP/TCP has de facto become the industry standard.

Economics. The way in which a change in an economic variable has an effect on the economy. For example how a change in interest rates would affect rates of inflation or exchange rates. An increase in interest rates in the UK would lead to an appreciation of the domestic currency in the foreign exchange market as the demand for Sterling increases.

(TLS). Transport Layer Security is a cryptographic protocol that provides secure communications on the Internet for such things as web browsing, e-mail, Internet faxing, instant messaging and other data transfers. There are slight differences between SSL (its predecessor) and TLS, but the protocol remains substantially the same. The TLS protocol allows applications to communicate across a network in a way designed to prevent eavesdropping, tampering, and message forgery. TLS provides endpoint authentication and communications privacy over the Internet using cryptography.

Law. Materials used in or influencing the drafting of legislation.

A card issued by non banks indicating that the holder has been granted a line of credit. It enables the holder to make purchases but does not offer extended credit, the full amount of the debt incurred having to be settled at the end of a specified period. The holder is usually charged an annual fee.

Acronym for Treasury counterparty.

A person appointed to manage the financial aspects of a society, company, city or other governing body. Small firms may combine the management position of Finance Director with that of Treasurer. Larger firms would split these responsibilities with the Treasurer responsible for day-to-day activities and the Finance Director for policy.

1. The UK government department responsible to the Chancellor of the Exchequer which (among its other responsibilities) is responsible for HM Revenue and Customs.

2. Comparable government departments in other countries.

3. A corporate function concerned with the management of financial risk. (The individuals who work in this function are known as corporate treasurers.)

4. An abbreviation for Treasury securities.

Short-term discount debt instruments issued by the central government.
For example, the US Treasury issues T-Bills in maturities of 13, 26 and 52 weeks.

Coupon securities issued by the US Treasury with interest paid semi-annually in original maturities of ten years to 30 years.

(TRCO). This allows properly sponsored companies to exchange messages relating to deal confirmation via SWIFT.

(TIIS) Also know as Treasury Inflation-Protected Securities (TIPS). USA. Government securities which are inflation-protected in respect of their real value through their linkage to the consumer price index.

Same as Treasury Inflation-Indexed Securities.

The practice and theory of corporate treasury.

Configurations of hardware, software, and information sources designed to assist in the collection and formatting of information and routine calculations.

(TMS). See Treasury Management Information System.

Interest-bearing securities issued by the US Treasury with original maturities of two to ten years.

‘Full Faith and Credit’ obligations of the US Government issued by sale at periodic auctions, and delivered and cleared electronically.

A company’s own shares that have been bought as a result of a share buy-back. In the UK, shares bought back may be held as treasury shares on the balance sheet, sold for cash, cancelled or used for employee share schemes.

(TWS). A personal computer that has software that gathers information from both internal and external sources and compiles the data to be analysed for decision-making purposes. It is also capable of initiating transactions such as wire transfers or ACH transfers.

(TWIST). This is an industry group set up to develop standards for transaction processing.

Trend analysis is based on reviewing historical price data, often for the purpose of predicting future price changes based on assuming the continuation of historical trends.
Trend analysis is an important aspect of Technical analysis.

Accounting. This is a list of closing balances for every account in the nominal ledger.

Treasury risk management committee.

Accounting. By law financial statements must give a 'true and fair view'. This phrase is undefined but depends upon both the application of generally accepted accounting principles and the exercise of judgement.

Banking. A procedure in which the physical movement of paper payment instruments (for example paid cheques or credit transfers) within a bank, between banks or between a bank and its customer is curtailed or eliminated, being replaced, in whole or in part, by electronic records of their content for further processing and transmission.

Law and pensions. A legal concept whereby property is held by one or more persons for the benefit of others for the purposes specified in the trust deed. In a pension context, the beneficiaries of the trust are the members of the pension scheme.

1. Law and pensions. A legal document, drawn up in the form of a deed, which establishes or regulates a trust. In relation to pensions, trust deeds constituting pension trusts can vary very widely in their form and content.

2. A similar legal document in a bond issue. Also known as the Bond indenture.

In relation to pensions, an insurance policy available to trustees, trustee directors and, sometimes, sponsoring companies in respect of certain categories of liability.

Law and pensions. Those who hold property under a trust arrangement. In relation to pensions, individuals who act as trustees (or as directors of a corporate trustee) may be company nominated, member nominated, or independent, as long as the provisions of the Pensions Act (in the UK) are complied with. Members of pension schemes, including those receiving pensions, may act as trustees of the related pension trust.

Abbreviation for Total shareholder return.

See Turnbull Guidelines.

The Turnbull Report (Internal Control: Guidance for Directors on the Combined Code), published by the Internal Control Working Party of the Institute of Chartered Accountants in England and Wales, sets out how directors of listed companies should comply with the UK's Combined Code requirements in respect of internal controls, including financial, operational, compliance and risk management.

1. The total sales for a business, usually expressed on a per annum basis.

2. The number of times that inventory or other working capital is replaced per annum. Measured for example by the Inventory turnover ratio.

The Time Value of Money.

Tax Written Down Value.

Abbreviation for Treasury Workstation Integration Standards Team.

A statistical significance test where the critical region consists of both tails of the distribution.

Different prices at which a market maker quotes simultaneously to buy or to sell an asset.

Abbreviation for treasury workstation.

An error that occurs in significance testing when the null hypothesis is rejected when it is actually true. Often known as the significance level.

An error that occurs in significance testing when the null hypothesis is accepted when it is actually false. Often known as the power of a test.