Instrument

AAA

DEFINITION of 'Instrument'

1) A tradeable asset or negotiable item such as a security, commodity, derivative or index, or any item that underlies a derivative. An instrument is a means by which something of value is transferred, held or accomplished.

2) An economic variable that can be controlled or altered by government policymakers in to cause a desired effect in other economic indicators.

3) A legal document such as a contract, will or deed.

INVESTOPEDIA EXPLAINS 'Instrument'

1) Basically, any asset purchased by an investor can be considered a financial instrument. Antique furniture, wheat and corporate bonds are all equally considered investing instruments; they can all be bought and sold as things that hold and produce value. Instruments can be debt or equity, representing a share of liability (a future repayment of debt) or ownership.

2) Commonly, policymakers and central banks adjust economic instruments such as interest rates to achieve and maintain desired levels of other economic indicators such as inflation or unemployment rates.

3) Some examples of legal instruments include insurance contracts, debt covenants, purchase agreements or mortgages. These documents lay out the parties involved, triggering events and terms of the contract, communicating the intended purpose and scope.

RELATED TERMS
  1. Federal Reserve System - FRS

    The central bank of the United States. The Fed, as it is commonly ...
  2. Debt

    An amount of money borrowed by one party from another. Many corporations/individuals ...
  3. Interest Rate

    The amount charged, expressed as a percentage of principal, by ...
  4. Monetary Policy

    The actions of a central bank, currency board or other regulatory ...
  5. Security

    A financial instrument that represents: an ownership position ...
  6. Bank Of Canada - BOC

    The central bank of Canada, that came into existence after the ...
Related Articles
  1. Stock Basics Tutorial
    Investing Basics

    Stock Basics Tutorial

  2. Break Out Of Your Comfort Zone And Win
    Active Trading Fundamentals

    Break Out Of Your Comfort Zone And Win

  3. Understanding Supply-Side Economics
    Economics

    Understanding Supply-Side Economics

  4. Explaining The World Through Macroeconomic ...
    Options & Futures

    Explaining The World Through Macroeconomic ...

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center