Financial Instrument Flashcards & Quizzes (2024)

FAQs

What are the 10 financial instruments? ›

Common examples of financial instruments include stocks, exchange-traded funds (ETFs), mutual funds, real estate investment trusts (REITs), bonds, derivatives contracts (such as options, futures, and swaps), checks, certificates of deposit (CDs), bank deposits, and loans.

There are typically three types of financial instruments: cash instruments, derivative instruments, and foreign exchange instruments.

What Is a Financial Instrument? International Accounting Standards (IAS) gives the definition of a financial instrument as such: a contract that results in one entity having a financial asset and another entity having a financial liability or an equity instrument.

Examples of these products are warrants and certificates. These products, as well as options and futures, are not suitable for the beginning investor because they are complex, volatile by nature, and risky.

The most common basic financial instruments are cash, trade debtors, trade creditors and most bank loans. a combination of a positive or a negative fixed rate and a positive variable rate.

Level 3 assets are financial assets and liabilities that are considered to be the most illiquid and hardest to value. Their values can only be estimated using a combination of complex market prices, mathematical models, and subjective assumptions.

What types of assets qualify as financial instruments? These could be anything from cash to shares. Financial instruments can be real-life documents or virtual agreements, representing ownership over something of monetary value.

Financial instruments are assets that can be traded or used for investment purposes. It can be broadly categorized into Equity-based (stocks, representing ownership in a company) and Debt-based (bonds, loans, representing a loan made by an investor to a borrower) securities.

The following are examples of items that are not financial instruments: intangible assets, inventories, right-of-use assets, prepaid expenses, deferred revenue, warranty obligations (IAS 32. AG10-AG11), and gold (IFRS 9. B. 1).

What is a financial instrument in layman terms? ›

In simple words, any asset which holds capital and can be traded in the market is referred to as a financial instrument. Some examples of financial instruments are cheques, shares, stocks, bonds, futures, and options contracts.

Early forms of exchange: Barter was likely the earliest form of "financial instrument," with goods and services being directly exchanged for each other. As societies grew, commodities like precious metals emerged as mediums of exchange, leading to the development of coins.

Safe assets are those that allow investors to preserve capital without a high risk of potential losses. Such assets include treasuries, CDs, money market funds, and annuities. There is, of course, a risk-return tradeoff, such that safer assets typically offer comparatively lower expected returns.

Treasury Bills (T-Bills)

Treasury Bills, which are issued by the federal government, are among the safest money market securities available. Treasury bills, however, have no risk. i.e., are instruments with zero risk.

A financial instrument is any asset that retains capital and may be traded on the market. Cheques, stocks, shares, bonds, futures, and options contracts are all types of financial instruments.

The two most prominent financial instruments are equities and bonds. Equities (or shares) are the ownership of a portion of a company, which can then be traded. The value of this portion may fluctuate depending on the company's performance and market conditions, making equities a potentially risky investment.

New financial instruments such as floating rate bonds, zero interest bonds, deep discount bonds, revolving underwriting finance facility, auction rated debentures, secured premium notes with detachable warrants, non-convertible debentures with detachable equity warrants, secured zero interest partly convertible ...

The following are examples of items that are not financial instruments: intangible assets, inventories, right-of-use assets, prepaid expenses, deferred revenue, warranty obligations (IAS 32. AG10-AG11), and gold (IFRS 9.