Financial Instruments

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Financial instruments: Financial instruments are claims to the payment of sum of money in future or a periodic interval. For example, the important financial instruments are shares, debentures, bonds, fixed deposits, etc. regular payment in the form of interests or dividend is paid by the company to the investors. These instruments are classified as primary or secondary instruments. The primary instruments are issued by the ultimate investors directly to the ultimate savers such as equity shares, debentures. Secondary instruments are issued by financial intermediaries to the ultimate savers as bank deposits, units and insurance policies. The financial instruments differ from each other in respect of their investment characteristics. The important characteristics are liquidity, transferability, volatility, maturity, risk and return.

Financial Instruments 1

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