A financial instrument is a tradable asset or contract that represents a monetary value. Instruments can be cash (currency) or evidence of ownership, debt, or contractual rights to receive or deliver cash or another financial instrument.
Classification
Equity Instruments
Represent ownership interest in an entity:
- Ordinary shares (common stock)
- Preference shares (preferred stock)
- Warrants and rights
Debt Instruments
Represent borrowed capital to be repaid:
- Corporate bonds
- Government bonds (gilts in the UK)
- Convertible bonds
- Commercial paper
Derivative Instruments
Derive value from underlying assets:
- Options (calls and puts)
- Futures contracts
- Swaps
- Contracts for Difference (CFDs)
Instrument Identifiers
Each instrument is uniquely identified by:
- TIDM: Trading mnemonic on the exchange
- ISIN: International Securities Identification Number
- SEDOL: Stock Exchange Daily Official List number
- CUSIP: North American identifier
Relationship to Issuers
A single issuer may have multiple instruments:
- Different share classes (ordinary, preference)
- Multiple bond issues with varying terms
- Derivatives based on their securities