Business, Legal & Accounting Glossary
An instrument having monetary value or recording a monetary transaction.
A Financial instrument is defined as a virtual or written document stating a legal agreement that has a monetary value. Financial instruments are broadly categorized as a debt-based financial instrument and equity-based financial instrument.
An equity-based financial instrument represents ownership of the asset. A debt-based financial instrument, on the other hand, is an index of the loan taken by the owner of an asset from the investor. Apart from these two main categories, there are a couple of other divisions as well. These include foreign exchange instruments.
The financial instruments enable the easy flow of finances or capital among international investors.
The following are certain important concepts related to financial instruments:
Derivatives are financial instruments. Characteristics and financial worth of a derivative is dependent on the same qualities of an underlier. Underlier is mostly a commodity, equity, bond or currency. Futures and options are examples of a derivative.
The financial worth of a primary instrument is fixed directly by the particular market where it is being traded. Its value is not calculated in accordance with that of another financial instrument.
Financial futures are futures contracts. They are based on certain types of financial instruments like treasury bonds, currencies, certificates of deposits and indexes.
The underlying value of an equity derivative is premised on a particular stock. Derivatives are used for hedging against risk. Options are used in such cases.
Bonds are used in the financial market for financing projects.
The cash register at Sally Beauty Mart is a financial instrument used to record the cash and credit transactions during the day.
The check was returned by the bank as a worthless financial instrument since the account the check was drawn on had been closed for over a year.
Financial instruments can be categorized by asset class depending on whether they are equity-based (reflecting ownership of the issuing entity) or debt-based (reflecting a loan the investor has made to the issuing entity).
futures exchange
debt-based asset
depressed price
buy signal
short-term funding
Halloween Strategy
legal transfer
forward
high current income mutual fund
Directional Movement Index
Markets in Financial Instruments Directive
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This glossary post was last updated: 1st November, 2021 | 0 Views.