Financial instruments

Financial Instruments can be categorised according to whether they are securities whether derivatives of other instruments (see derivative securities)or so called cash securities. If they are a derivative, they can be further categorised depending on whether they are traded as standard derivatives or traded over the counter (OTC).

Alternatively they can be categorised by 'asset class' depending on whether they are equity based (reflecting ownership of an asset) or debt based (reflecting a loan the investor has nade to the owner of an asset). If it is a debt security, it can be further categorised into short term (less than one year) or long term. Foreign Exchange instruments and transactions neither debt nor equity based and belong in their own category.

Combining the above methods for categorisation, the main instruments can be organised into a matrix as follows:

     
INSTRUMENT TYPE

     
ASSET CLASS

     Bond
Floating rate note

     Bond future option
Bond future(see also futures)

     Interest rate cap & Interest rate floors

     Cross currency swap

     Exotic instruments

     
Bill - (Capital Markets)
CD (Certificate of deposit)
CP (Commercial paper)

     Stock
(Equity index)

     Equity futures (see also futures)

     
Foreign exchange forwards

Some instruments defy categorisation into the above matrix, for example repos or repurchase agreements.

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