Financial Instrument

AAA

DEFINITION of 'Financial Instrument'

A real or virtual document representing a legal agreement involving some sort of monetary value. In today's financial marketplace, financial instruments can be classified generally as equity based, representing ownership of the asset, or debt based, representing a loan made by an investor to the owner of the asset. Foreign exchange instruments comprise a third, unique type of instrument. Different subcategories of each instrument type exist, such as preferred share equity and common share equity, for example.

INVESTOPEDIA EXPLAINS 'Financial Instrument'

Financial instruments can be thought of as easily tradeable packages of capital, each having their own unique characteristics and structure. The wide array of financial instruments in today's marketplace allows for the efficient flow of capital amongst the world's investors.

VIDEO

Loading the player...
RELATED TERMS
  1. Bond

    A debt investment in which an investor loans money to an entity ...
  2. Capital

    1) Financial assets or the financial value of assets, such as ...
  3. Primary Instrument

    A financial investment whose price is based directly on its market ...
  4. Regulation J

    A regulation set forth by the Federal Reserve. Regulation J establishes ...
  5. Common Stock

    A security that represents ownership in a corporation. Holders ...
  6. Equity

    1. A stock or any other security representing an ownership interest. ...
RELATED FAQS
  1. Is reclassification of a financial instrument ever permitted?

    Financial instruments are sometimes reclassified for regulatory or accounting purposes. In the United States, the classification ... Read Full Answer >>
  2. What kinds of acts pertaining to interests in collective investment schemes are excluded ...

    The two main kinds of acts excluded from regulation as "financial instruments business," which pertain to interests in collective ... Read Full Answer >>
  3. Why are insurance companies and pension funds considered financial instruments?

    Insurance policies are widely considered to be financial instruments. Pension funds may contain many different types of financial ... Read Full Answer >>
  4. Is a person registered for Financial Instruments Business eligible to conduct both ...

    A person in the financial instruments business, as defined by the Financial Instruments and Exchange Law, is allowed to engage ... Read Full Answer >>
  5. Is there short selling in China?

    The Chinese stock market has no history of short sales. However, in 2007, the Chinese government, in an effort to increase ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Understanding Financial Instruments

    Financial instrument is a general term used to describe a monetary asset.
  2. Investing Basics

    Stock Basics Tutorial

    If you're new to the stock market and want the basics, this is the tutorial for you!
  3. Investing Basics

    An Introduction To Stock Market Indexes

    Investopedia explains the five most talked about indexes and what makes them all different.
  4. Home & Auto

    The Bear On Bonds

    Bond investing is a stable and low-risk way to diversify a portfolio. However, knowing which types of bonds are right for you is not always easy.
  5. Retirement

    The Money Market

    If your investments in the stock market are keeping you from sleeping at night, it's time to learn about the safer alternatives in the money market.
  6. Options & Futures

    20 Investments You Should Know

    To take advantage of all your investing options, you need to know what your choices are. Here we tell you about the diverse features and advantages of 20 different financial instruments.
  7. Investing Basics

    Explaining Net Tangible Assets

    Net tangible assets is a company’s total assets subtracting both intangible assets (such as goodwill and intellectual property) and total liabilities.
  8. Economics

    What Does Liquidation Mean?

    Creditors liquidate assets to try and get as much of the money owed to them as possible.
  9. Stock Analysis

    Google Stock: A Tale of Two Share Classes

    Google stock comes in two different flavors with different rights for shareholders.
  10. Investing

    7 Investing Mistakes Warren Buffett Regrets

    Even the “Oracle of Omaha” has made a few money mistakes investing, from losing billions by passing on stock options to companies destined to fail.

You May Also Like

Hot Definitions
  1. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  2. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  3. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  4. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  5. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
  6. Touchline

    The highest price that a buyer of a particular security is willing to pay and the lowest price at which a seller is willing ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!