Category: Financial Terms

The Economic Trilemma (Impossible Trinity) The economic trilemma—also called the impossible trinity—describes a fundamental constraint in international macroeconomics: a country cannot simultaneously maintain all three of the following policies. It must choose two and give up the third. The three policy options Fixed exchange rate (a stable or pegged currency) Free cross-border capital flows (open…

Triggering Event: Definition and Examples A triggering event is an occurrence—tangible or intangible—that, once met or breached, causes contractual rights, obligations, or protections to change. Triggering events are built into many contracts to specify when parties can act, when benefits apply, or when penalties and remedies are imposed. Key takeaways Triggering events alter the current…

Trickle-Down Theory Trickle-down theory is a political and economic idea tied to supply-side policies: the notion that reducing taxes and regulations for corporations and high-income individuals will spur investment, job creation, and overall economic growth that eventually benefits all income groups. How the theory works Proponents argue that when businesses and wealthy individuals keep more…

Triangular Arbitrage Overview Triangular arbitrage is a forex trading strategy that exploits temporary price discrepancies among three currency pairs. A trader converts an initial currency into a second, switches the second into a third, and finally converts the third back into the original currency. If the cross‑rates are out of sync, this sequence can yield…

Triangle Chart Patterns Triangle chart patterns are common tools in technical analysis formed when price action narrows between two converging trendlines. They signal a pause in price movement and can precede either a continuation or a reversal of the prior trend. Traders watch for confirmed breakouts or breakdowns to act. Key takeaways Triangles form when…

Understanding Trial Balance: Definition, Purpose, and Key Requirements Key takeaways * A trial balance verifies that total debits equal total credits in the general ledger, serving as a basic check for arithmetic accuracy. * It cannot detect certain errors—such as omitted transactions, misclassifications, or offsetting errors—even when debits and credits balance. * There are three…

Treynor Ratio The Treynor ratio (reward-to-volatility ratio) measures how much excess return a portfolio generates per unit of systematic risk. It adjusts returns for market-related risk (beta), helping investors compare risk-adjusted performance across portfolios exposed to market movements. Formula Treynor Ratio = (rp − rf) / βp Explore More Resources › Read more Government Exam…

Trendline What is a trendline? A trendline is a basic charting tool used in technical analysis to show the prevailing direction of a security’s price. It is drawn by connecting a series of pivot highs (to form resistance) or pivot lows (to form support). Trendlines help visualize the direction, slope (speed), and strength of a…

Trend Trading Trend trading is a style that seeks to capture gains by following the prevailing direction of an asset’s price—either up (uptrend) or down (downtrend). Traders use price action and technical tools to identify the trend, find entry points that align with it, and manage risk until the trend shows signs of reversing. Key…

Trend Analysis Trend analysis uses historical price and fundamental data to identify the prevailing direction of a market, sector, or security and to forecast its likely near‑term movement. Traders use it to time entries and exits; investors use it to assess longer‑term momentum and market sentiment. Because it relies on past data, trend analysis should…

Trend: Definition, Types, and Uses in Trading A trend is the general direction in which a market, asset price, or metric moves over time. In trading and technical analysis, trends help traders and investors understand prevailing market sentiment and make decisions about when to buy, sell, or hold. Key takeaways A trend describes the overall…

Treaty Reinsurance What treaty reinsurance is Treaty reinsurance is a long-term contract in which a primary insurer (the cedent) transfers the risks from a defined class or block of policies to a reinsurer. Instead of negotiating coverage for each individual policy, the reinsurer agrees in advance to accept a share of the cedent’s specified business…

Treasury Yield What is a treasury yield? Treasury yield is the annualized percentage return an investor receives for holding a U.S. government debt security (T-bills, T-notes, T-bonds). Yields reflect the interest the government pays to borrow and serve as a benchmark for other interest rates across the economy. Higher long-term yields generally signal stronger economic…

Treasury STRIPS (Zero-Coupon Treasuries) Key takeaways * Treasury STRIPS (Separate Trading of Registered Interest and Principal of Securities) are zero-coupon U.S. government securities sold at a discount and redeemed at face value at maturity. * STRIPS are created by separating a Treasury bond’s coupon payments from its principal; each piece becomes an individually tradable security….

Treasury Stock Method — Calculating Diluted EPS Key takeaways The treasury stock method estimates how many additional shares would be created if in-the-money options and warrants were exercised. It assumes exercise proceeds are used to repurchase shares at the average market price, producing a net increase in shares. The method is required under GAAP when…

Treasury Stock (Treasury Shares) Treasury stock refers to shares that a company previously issued and later repurchased. These shares remain issued but are no longer outstanding — they do not receive dividends, do not have voting rights, and are excluded from earnings-per-share (EPS) calculations. On the balance sheet, treasury stock is recorded as a contra-equity…

Treasury Notes: Definition, Maturity Terms, and Buying Guide A Treasury note (T-note) is a U.S. government debt security that pays a fixed interest rate and matures in two to ten years. T-notes pay interest semiannually, are highly liquid thanks to an active secondary market, and are taxable at the federal level but exempt from state…

Treasury Inflation-Protected Securities (TIPS) Key takeaways TIPS are U.S. Treasury bonds indexed to inflation (CPI) to protect purchasing power. The principal adjusts with CPI; interest is paid semiannually on the inflation-adjusted principal. At maturity you receive the inflation-adjusted principal or the original principal, whichever is greater. TIPS can lose market value before maturity when interest…

TreasuryDirect: Definition, How It Works, and Benefits Key takeaways TreasuryDirect is the U.S. Treasury’s online portal for buying and redeeming federal securities directly, in electronic form. Available securities include Treasury bills, notes, bonds, TIPS, and Series I and EE savings bonds. The platform eliminates broker commissions by selling new-issue Treasuries directly to investors; minimum investment…

What is a Treasury Bond (T‑Bond)? A Treasury bond (T‑bond) is a long-term, fixed-interest debt security issued by the U.S. Department of the Treasury with maturities of 20 or 30 years. Backed by the full faith and credit of the U.S. government, T‑bonds are widely used as a low‑risk component of conservative portfolios and as…

Treasury Bills (T-Bills): What They Are and How to Invest What is a T‑Bill? A Treasury bill (T‑bill) is a short-term U.S. government debt security that matures in one year or less (common maturities: 4, 8, 13, 17, 26, and 52 weeks). T‑bills are zero‑coupon instruments sold at a discount to face value; you receive…

Traveler’s Checks Traveler’s checks are prepaid paper instruments issued in fixed denominations that function like cash for purchases or redemption abroad. They were designed to provide a secure way to carry money overseas because they can be canceled and replaced if lost or stolen. Use has declined sharply with the rise of credit/debit cards and…

Travel Insurance: What It Covers and How to Choose It Travel insurance protects you from unexpected financial losses and expenses that can occur before or during a trip, such as trip cancellation, medical emergencies, baggage loss, and travel delays. Policies vary widely in cost and coverage; typical premiums run about 4%–10% of the total trip…

Travel Expenses: What Counts and When They’re Tax Deductible Key takeaways Travel expenses are costs incurred while traveling away from your tax home for business purposes. Only “ordinary and necessary” business travel expenses are deductible; unreasonable, lavish, or personal expenses are not. Employees are considered to be traveling for tax purposes when work obligations require…

Traunch: Splitting Payments to Manage Investor Risk A traunch is one installment in a series of scheduled payments tied to specific performance milestones. Common in venture capital (VC) and structured finance, traunched funding allocates capital over time so investors can condition later disbursements on a startup meeting agreed targets. What a traunch looks like Capital…

Transposition Error A transposition error occurs when two adjacent digits are accidentally reversed during data entry (for example, entering 72 instead of 27). Although the mistake may seem small, it can produce meaningful accounting and operational discrepancies that propagate through financial reports, tax filings, banking transactions, customer records, and — in extreme cases — medical…

Transportation Sector Overview The transportation sector comprises companies and infrastructure that move people and goods. It includes carriers, logistics providers, and firms that build or operate transportation networks. According to common industry classifications, transportation is a subset of the broader industrials sector. Core industries and sub‑industries Air freight and logistics Airlines Marine shipping and ports…

Transparency What is transparency? Transparency is the clear, timely disclosure of information that allows investors, customers, and other stakeholders to understand an organization’s actions, finances, fees, and risks. In finance, transparency means providing access to audited financial reports, price and market data, and full disclosure of fees and terms so market participants can make informed…

Translation Exposure Translation exposure (also called translation risk or accounting exposure) is the risk that a company’s reported equity, assets, liabilities, or income will change in value solely because of exchange rate movements. It arises when some portion of a firm’s balance sheet or income statement is denominated in a foreign currency and must be…

Transferable Letters of Credit A transferable letter of credit (LC) is a bank guarantee that lets the initial beneficiary (the first beneficiary) transfer some or all of the credit to one or more secondary beneficiaries. It is commonly used when the first beneficiary acts as an intermediary—such as a retailer, broker, or reseller—and relies on…

Transfer Tax What is a transfer tax? A transfer tax is a government charge on the transfer of ownership or title to property from one person or entity to another. It can be imposed by state, county, or municipal authorities and is usually based on the value of the property being transferred. Transfer taxes commonly…

Transfer Pricing Transfer pricing sets the prices for goods, services, or intangibles exchanged between divisions, subsidiaries, or affiliates of the same multinational company. When done at arm’s length—that is, as if the transactions occurred between unrelated parties—it is a legitimate accounting practice that helps allocate costs, revenues, and profits across an organization. Because it affects…

Transfer Price Key takeaways * A transfer price is the price charged for goods, services, or labor exchanged between related parties (divisions, subsidiaries, or affiliates). * Prices that deviate from market value shift profits between entities and can create tax advantages or disadvantages. * The arm’s‑length principle—pricing transactions as if between unrelated parties—is the standard…

Transfer Payments Transfer payments are monetary distributions made without an exchange of goods or services. They are primarily government-to-individual payments intended to provide income support, redistribute wealth, and stabilize the economy. Because recipients do not provide goods or services in return, transfer payments are treated differently in national accounts than government purchases. Key takeaways Transfer…

Transfer on Death (TOD) A transfer on death (TOD) is a legal designation that lets you name one or more beneficiaries to receive specified assets automatically when you die. Unlike a will, assets with TOD designations generally bypass probate, making transfers faster, private, and less costly. How TOD works You name beneficiaries on an account-specific…