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.

RELATED TERMS
  1. Capital

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

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

    A regulation set forth by the Federal Reserve. Regulation J establishes ...
  4. Bond

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

    A class of ownership in a corporation that has a higher claim ...
  6. Plain Vanilla

    The most basic or standard version of a financial instrument, ...
Related Articles
  1. Stock Basics Tutorial
    Investing Basics

    Stock Basics Tutorial

  2. An Introduction To Stock Market Indexes
    Investing Basics

    An Introduction To Stock Market Indexes

  3. The Bear On Bonds
    Home & Auto

    The Bear On Bonds

  4. Is there short selling in China?
    Active Trading Fundamentals

    Is there short selling in China?

comments powered by Disqus
Hot Definitions
  1. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  2. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  3. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  6. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
Trading Center