Financial Instrument


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.


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BREAKING DOWN '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.

  1. Plain Vanilla

    The most basic or standard version of a financial instrument, ...
  2. Equity

    Equity is the value of an asset less the value of all liabilities ...
  3. Preferred Stock

    A class of ownership in a corporation that has a higher claim ...
  4. Bond

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

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

    A financial investment whose price is based directly on its market ...
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  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 types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>

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