Two nodes are considered to be adjacent if there an edge directly between them. A triad is any triple of nodes (actors) (A, B, C). There are sixteen possible kinds of triads in a directed network. A triad (A, B, C) is said to be transitive if A and B are adjacent and B and C are adjacent. there is a link (tie) from A to B (AB) and a link from B to C (BC), then there is also a link from A to C (AC).
Transitivity is defined as the ratio of number of transitive triads (AB, BC and AC) to the total number of those triads (DE and EF) where a third link (DF) would make it transitive.
This algorithm must be applied to directed & unweighted networks. Self-loops are ignored.
Hanneman, Robert A. and Mark Riddle. 2005. Introduction to social network methods. Riverside, CA: University of California, Riverside.