The tendency of variables to move together in the extremes more than in normal times. A normal-based dependence structure does not capture it. Where it appears →
Tail risk
The risk of rare, extreme losses far from the centre of the distribution. It is the focus of expected shortfall and stress testing. Where it appears →
Third-party risk
The risk arising from reliance on external providers for services or data. A firm stays accountable for the outsourced activity. Where it appears →
Three lines of defence
A model that separates risk-taking in the business, independent risk oversight, and independent assurance by internal audit. It keeps those who take risk apart from those who check it. Where it appears →
Tier 1 capital
Capital that can absorb losses while the bank continues to operate, made up of common equity tier 1 and additional tier 1 instruments. Where it appears →
Total return swap
A swap in which one party pays the total return of an asset and receives a floating rate. It gives exposure to the asset without owning it. Where it appears →
Tracking error
The standard deviation of the difference between a portfolio's return and its benchmark's. It measures how far a portfolio strays from its benchmark. Where it appears →
Trading book
Positions held for trading or to hedge other trading positions, valued at market prices. They attract market risk capital. Where it appears →
Tranche
A slice of a securitisation with its own claim on the cash flows and its own loss priority. Junior tranches absorb losses first. Where it appears →
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