"Financial instruments are monetary contracts between parties. They can be created, traded, modified and settled."
The various securities and derivatives such as stocks, bonds, futures, and options that are used to invest and manage risk.
Financial Markets: This topic covers the different types of financial markets such as money markets, bond markets, stock markets, derivatives markets, and commodities markets. It also covers the functions of each market.
Financial Instruments: This topic covers the various types of financial instruments such as stocks, bonds, mutual funds, exchange-traded funds (ETFs), options, futures, and swaps. It also covers the features, risks, and benefits of each instrument.
Time Value of Money: This topic covers the concept that money today is worth more than the same amount of money in the future. It also covers the calculation of present value, future value, and the different types of interest rates.
Risk and Return: This topic covers the relationship between risk and return in investing. It also covers the risk measures such as standard deviation and beta, and the theory of portfolio diversification.
Capital Asset Pricing Model (CAPM): This topic covers the model used to price risky assets and calculate the expected return on an investment.
Efficient Market Hypothesis (EMH): This topic covers the theory that states that financial markets are efficient and stock prices reflect all available information.
Financial Statement Analysis: This topic covers the analysis of financial statements such as the balance sheet, income statement, and statement of cash flows. It also covers the calculation of financial ratios to evaluate a company's performance.
Corporate Finance: This topic covers the financial decisions made by a corporation such as capital budgeting, financing decisions, and dividend policy.
International Finance: This topic covers the financial transactions between countries and the management of foreign exchange risk.
Behavioral Finance: This topic covers the psychological and emotional factors that affect investment decision-making. It also covers the biases and heuristics that investors may exhibit.
Stocks: Stocks represent partial ownership in a corporation and give investors a vote in corporate decisions.
Bonds: Bonds are debt instruments that pay investors interest.
Options: Options give investors the right to buy or sell an asset at a predetermined price at a future date.
Futures: Futures are contracts to buy or sell an underlying asset at a future date for a predetermined price.
Mutual funds: Mutual funds are investment funds that pool money from multiple investors to invest in various securities.
Exchange-traded funds (ETFs): ETFs are similar to mutual funds, but trade on an exchange like a stock.
Derivatives: Derivatives are financial instruments whose value is derived from an underlying asset or index.
Commodities: Commodities are physical goods such as oil, gold, or wheat.
Forex: Forex stands for foreign exchange, and these financial instruments allow investors to trade in different currencies.
Real estate investment trusts (REITs): REITs allow investors to invest in real estate without owning property themselves.
Insurance products: Insurance products such as life insurance and annuities provide financial protection for individuals and families.
Certificates of deposit (CDs): CDs are low-risk investments that pay a fixed interest rate for a set period.
Savings accounts: Savings accounts offer a low-risk place to store cash and earn interest.
Asset-backed securities: Asset-backed securities represent ownership of a group of underlying assets such as mortgages or car loans.
Structured products: Structured products are complex financial instruments that combine various underlying assets to meet specific investment objectives.
"Financial instruments may be categorized by 'asset class' depending on whether they are equity-based or debt-based."
"They can be cash (currency), evidence of an ownership interest in an entity or a contractual right to receive or deliver in the form of currency (forex)."
"They can be debt (bonds, loans)."
"They can be equity (shares)."
"They can be derivatives (options, futures, forwards)."
"International Accounting Standards IAS 32 and 39 define a financial instrument as 'any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity'."
"If the instrument is debt, it can be further categorized into short-term (less than one year) or long-term."
"Short-term (less than one year) debt instruments could include Treasury bills or commercial paper."
"Long-term debt instruments could include government bonds or corporate debentures."
"Foreign exchange instruments and transactions are neither debt- nor equity-based and belong in their own category."
"Equity-based financial instruments reflect ownership of the issuing entity, while debt-based financial instruments reflect a loan the investor has made to the issuing entity."
"They can be created, traded, modified, and settled."
"Yes, financial instruments are monetary contracts between parties."
"A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity."
"No, financial instruments can exist between any entities capable of entering into a contract."
"Yes, financial instruments can be modified."
"Yes, financial instruments can be settled."
"No, financial instruments can also include contractual rights to receive or deliver currency."
"Yes, financial instruments can be traded internationally."