sarwiki

Financial Instruments

Assets which can be traded
Packages of capital
Can be
- Cash
- Contractual right to deliver or receive cash
- Another type of financial instrument
- Evidence of ownership of an entity
Two main types
- Cash
  - Directly influenced and determined by markets
  - Can be easily transferable securities
  - Can be deposits and loans
- Derivative
  - Value based on value of underlying components
    - Assets
    - Interest rates
    - Indices
- Foreign exchange instruments
Two main asset classes
- Debt-based
  - Loan made by an investor to owner of an asset
  - Short term < 1 year
    - T-bills
    - Commercial paper
- Equity-based
  - Ownership of an asset

A financial instrument is a real or virtual document representing a legal agreement involving any kind of monetary value.

“any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity”