Financial instrument

Finance
Markets Bond Commodity Derivatives Foreign exchange Money Over-the-counter Private equity Real estate Spot Stock Participants Investor institutional Retail Speculator
Instruments Cash Credit line Deposit Derivative Futures contract Loan Option (call exotic put) Security Stock Time deposit (certificate of deposit)
Corporate Accounting Audit Capital budgeting Credit rating agency Risk management Financial statement Leveraged buyout Mergers and acquisitions Structured finance Venture capital
Personal Credit / Debt Employment contract Financial planning Retirement Student loan
Public Government spending Final consumption expenditure Operations Redistribution Transfer payment Government revenue Taxation Deficit spending Budget (balance) Debt Non-tax revenue Warrant of payment
Banks and banking Central bank Deposit account Fractional-reserve banking Loan Money supply Lists of banks
Regulation · Standards Professional certification Accounting scandals International Financial Reporting Standards ISO 31000
Economic history Private equity and venture capital Recession Stock market bubble Stock market crash

A financial instrument is a tradable asset of any kind; either cash, evidence of an ownership interest in an entity, or a contractual right to receive or deliver cash or another financial instrument.

According to IAS 32 and 39, it is defined as "any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity".^[1]

Categorization

Financial instruments can be categorized by form depending on whether they are cash instruments or derivative instruments:

• Cash instruments are financial instruments whose value is determined directly by the markets. They can be divided into securities, which are readily transferable, and other cash instruments such as loans and deposits, where both borrower and lender have to agree on a transfer.
• Derivative instruments are financial instruments which derive their value from the value and characteristics of one or more underlying entities such as an asset, index, or interest rate. They can be divided into exchange-traded derivatives and over-the-counter (OTC) derivatives.^[2]

Alternatively, 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). If it is debt, it can be further categorised into short term (less than one year) or long term.

Foreign Exchange instruments and transactions are neither debt nor equity based and belong in their own category.

A table

Combining the above methods for categorization, the main instruments can be organized into a table as follows:

Some instruments defy categorization into the above matrix, for example repurchase agreements.

Measuring financial instruments' gain or loss

The table below shows how to measure a financial instrument's gain or loss:

See also

• Off-balance-sheet issues

References

External links

• IFRS List – The online community about IFRS/IAS and Auditing
• Understanding Derivatives: Markets and Infrastructure Federal Reserve Bank of Chicago, Financial Markets Group
• Financing Instruments