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Transfer of Risk Definition A transfer of risk is a risk-management strategy in which one party shifts responsibility for potential loss and its financial consequences to another party, usually in exchange for payment. The most common form is insurance, but risk transfer also occurs through contracts and other financial arrangements. How risk transfer works Insurance:…

Transfer Agent Transfer agents are financial intermediaries—often trust companies, banks, or specialized service firms—that maintain ownership records for publicly traded companies, mutual funds, and issuers of debt securities. They ensure accurate record-keeping, facilitate securities transfers, and manage distributions such as dividends and bond payments. Key takeaways Maintain shareholder and bondholder records and account balances. Issue…

Transaction Fees What are per-transaction fees? Per-transaction fees are charges a merchant pays each time it processes an electronic payment (card or other digital payment). They typically consist of a percentage of the transaction (commonly around 0.5%–5%) plus one or more fixed cents-per-transaction fees. How they work Merchants use a merchant acquiring bank and a…

Transaction Exposure Transaction exposure is the risk that a firm faces when exchange rates change between the time it enters a contract denominated in a foreign currency and the time the transaction is settled. Also called translation exposure or translation risk, it can cause gains or losses for the party that must pay or receive…

Understanding Transaction Costs Key takeaways * Transaction costs are fees paid when buying or selling a good or service (e.g., broker commissions, agent fees, closing costs). * They reduce net investment returns by lowering the capital available to invest. * Ongoing fees (recurring) differ from transaction costs (per-trade or per-event). * Technology and direct-to-consumer models…

Transaction: Definition, Accounting, and Examples What is a transaction? A transaction is an agreement between two or more parties to exchange goods, services, or financial assets for money. In simple consumer terms, it’s complete when the buyer pays and the seller delivers. In business accounting, however, when a transaction is recorded depends on the company’s…

Understanding Tranches: Definition, How They Work, Examples, and Investment Strategies Tranches are slices of a pooled financial product—such as bonds, loans, or mortgages—created to separate cash flows and risk characteristics so investors can choose exposure that matches their risk tolerance and return goals. Key takeaways Tranches divide pooled securities by priority, maturity, yield, and credit…

Trailing Stop A trailing stop is a stop-loss order that automatically adjusts with the market price to protect profits as a trade moves in your favor. It lets winning positions run while limiting downside if the market reverses. Key takeaways Trailing stops protect gains by moving the stop price as the market moves in your…

Trailing price-to-earnings (Trailing P/E) Trailing price-to-earnings (trailing P/E) is a valuation metric that compares a company’s current share price to its actual earnings per share (EPS) from the most recent 12 months. It expresses how much investors are willing to pay today for each dollar of the company’s past-year earnings. How it’s calculated Trailing P/E…

Trailing 12 Months (TTM): Definition, Calculation, and Uses What is TTM? Trailing 12 months (TTM), also called last 12 months (LTM), refers to a company’s financial performance over the most recent 12 consecutive months. TTM provides a more current and seasonally adjusted view of metrics—such as revenue, earnings, EPS, dividend yield, and P/E ratio—than annual…

Tragedy of the Commons Key takeaways The tragedy of the commons describes how individuals exploiting a shared, rivalrous resource can deplete it, harming the whole community. Commons are non-excludable and limited in supply, which creates incentives for overuse. Solutions include regulation, property rights, and collective management institutions. What it is The tragedy of the commons…

Traditional IRA Key takeaways A traditional IRA is a tax-deferred retirement account funded with pre-tax (or deductible) contributions; investment growth is taxed on withdrawal. Withdrawals are taxed as ordinary income; distributions before age 59½ generally incur a 10% penalty unless an exception applies. Annual contribution limits (2024–2025): $7,000 for those under 50; $8,000 for age…

Trading Session Definition A trading session is the period during which a market or asset is actively traded on an exchange or trading platform. For many markets this means a defined “opening” and “closing” time each business day, though some instruments trade around the clock. Key takeaways U.S. equities trade regularly from 9:30 a.m. to…

Mastering Trading Strategies: A Step-by-Step Guide Key takeaways – A trading strategy is a systematic set of rules for when to buy, sell, and manage positions. – Strategies can be based on technical indicators, fundamental analysis, or quantitative models. – Core elements include objective setting, risk management, trade execution, cost control, and tax planning. –…

Trading Platforms: Features, Types, and Top Examples A trading platform is software—usually provided by a brokerage or financial institution—that lets investors place trades, monitor positions, and manage accounts online. Platforms vary from simple mobile apps for beginners to sophisticated desktop systems for professional and institutional traders. Key offerings include real-time quotes, charting and technical-analysis tools,…

Trading Houses: Definition and How They Work A trading house is a company that facilitates international trade by acting as an importer, exporter, agent and/or merchant. It may: Buy and sell goods on behalf of clients and for its own account. Act as a local representative or distributor for foreign manufacturers. Handle logistics, customs clearance,…

Trading Halt What is a trading halt? A trading halt is a temporary suspension of trading in a particular security (or securities) at one exchange or across multiple exchanges. Halts are used to manage significant news events, correct order imbalances, address technical problems, or respond to rapid price moves that could undermine fair and orderly…

Trading Desk: Definition, What It Does, Common Types A trading desk is the area within a financial firm where buying and selling of securities is executed. Also called a dealing desk, it can be staffed by traders executing for the firm’s proprietary account, brokers acting as agents for clients, or a mix of both. Trading…

Trading Book: Definition, Function, Risks, and Historical Lessons A trading book is the portfolio of tradeable financial instruments maintained by a bank, broker-dealer, or other financial institution for the purpose of short-term trading, market-making, or hedging. Because trading books are actively traded and often highly leveraged, they can grow large and require rigorous risk controls…

Trading Account — Overview A trading account is a brokerage account that holds securities, cash, or other assets and is used for active buying and selling. Traders who buy and sell the same security within a single trading day typically use these accounts. Trading accounts can be cash or margin accounts; day traders commonly use…

Understanding Traders: Roles, Strategies, and Skills A trader buys and sells financial assets—stocks, bonds, currencies, commodities, derivatives—with the goal of profiting from short- to medium-term price movements. Unlike long-term investors, traders focus on timing, position sizing, and risk management to capture market opportunities over seconds to months. Successful trading requires analytical skill, discipline, and emotional…

Trademark — what it is and why it matters A trademark is a distinctive sign — such as a word, name, logo, symbol, slogan, or design — that identifies the source of goods or services and distinguishes them from others in the marketplace. Trademarks are a form of intellectual property and help consumers associate products…

What Is a Trade War? A trade war occurs when countries retaliate against each other by imposing tariffs or other trade restrictions on imports. It typically begins as a protectionist response—meant to shield domestic industries or punish perceived unfair practices—but can escalate, spreading economic harm across sectors and borders. How Trade Wars Start Protectionism: Governments…

Trade Surplus Key takeaways A trade surplus occurs when a country’s exports exceed its imports (positive trade balance). It can stimulate job creation and economic growth but may also contribute to higher prices, interest rates, and a stronger currency. Trade surpluses and deficits are both common among healthy economies; neither alone determines economic strength. Leading…

Trade Signals: How They Guide Buy and Sell Decisions Definition A trade signal is a trigger—based on analysis—that indicates an opportunity to buy, sell, or adjust a position in a security or asset. Signals can come from technical indicators, mathematical algorithms, fundamental data, macroeconomic factors, or market sentiment. Key takeaways Trade signals convert analysis into…

Trade Secret: Definition and Key Points A trade secret is confidential business information—such as a formula, process, method, design, pattern, compilation, program, device, or technique—that gives a company a competitive or economic advantage. Unlike patents, trade secrets are not publicly disclosed; protection depends on maintaining secrecy. Key traits of a trade secret: * Not generally…

Trade Sanctions Trade sanctions are legal restrictions on trade with a country used to pursue foreign policy objectives. They form a subset of economic sanctions—measures that impose economic costs to influence a target country’s behavior, punish objectionable actions, or signal disapproval. Key takeaways Trade sanctions restrict imports, exports, or broader commercial activity with a target…

Understanding Trade Lines: Credit Reporting and Record-Keeping Explained Key takeaways * A trade line is a record on your credit report for each credit account (credit cards, mortgages, auto loans, student loans, etc.). * Trade lines track account details and payment activity; credit bureaus use them to calculate credit scores. * Important components include creditor…

Trade liberalization Trade liberalization is the reduction or removal of government-imposed barriers to international trade—such as tariffs, quotas, licensing requirements, and other restrictions—to encourage freer exchange of goods and services between countries. How it works Governments lower tariffs or abolish import/export quotas and ease regulatory barriers. Countries negotiate bilateral or multilateral trade agreements (e.g., free…

Trade Finance: What It Is and Why It Matters Trade finance comprises the financial instruments, products, and processes that enable and secure international trade. Its main purpose is to reduce payment and performance risk and to bridge timing gaps between exporters who want prompt payment and importers who prefer deferred payment. Key takeaways Trade finance…

Trade Deficit A trade deficit occurs when a country imports more goods and services than it exports over a given period, producing a negative balance of trade. It is one component of a country’s balance of payments and can be measured for goods, services, or both together. Key points Trade deficits reflect net international purchases…

Understanding Trade Credit Trade credit is a business-to-business arrangement that lets a buyer receive goods or services and defer payment to a later date—typically 7, 30, 60, 90, or 120 days—often without interest. It functions as short-term, interest-free financing for the buyer and creates an accounts receivable for the seller. How Trade Credit Works A…

Trade: Definition, Mechanics, Benefits, and Challenges What is trade? Trade is the voluntary exchange of goods or services between parties, undertaken when both sides expect to benefit. In everyday life it ranges from informal swaps to high‑value commercial contracts. In finance, trading refers to buying and selling securities, commodities, or derivatives. International trade is the…

Tracking Stock What is a tracking stock? A tracking stock is a special class of equity issued by a parent company that is tied to the financial performance of a specific business segment or division. Tracking shares trade separately from the parent company’s common stock, allowing investors to gain exposure to one part of a…

Tracking Error: What It Is and Why It Matters Key takeaways * Tracking error measures how closely a portfolio follows its benchmark; it’s typically the standard deviation of the difference between portfolio and benchmark returns. * Major drivers include fees and costs, sampling/replication choices, liquidity and trading frictions, ETF mechanics (cash, premiums/discounts, futures roll), taxes,…