Financial instrument - Wikipedia, the free encyclopedia

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From Wikipedia, the free encyclopedia

A financial instrument is a tradable asset of any kind, either cash; evidence of an ownership interest in an entity; or a contractual right to receive, or deliver, cash or another financial instrument. According to IAS 32 and 39, it is defined as 'any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity'.

1 Categorization 1.1 A table 2 Measuring Financial Instrument's Gain or Loss 3 See also 4 External links

Financial instruments can be categorized by form depending on whether they are cash instruments or derivative instruments: Cash instruments are financial instruments whose value is determined directly by markets. They can be divided into securities, which are readily transferable, and other cash instruments such as loans and deposits, where both borrower and lender have to agree on a transfer. Derivative instruments are financial instruments which derive their value from the value and characteristics of one or more underlying entity such as an Asset an Index or an Interest Rate. They can be divided into exchange-traded derivatives and over-the-counter (OTC) derivatives. Alternatively, financial instruments can be categorized by "asset class" depending on whether they are equity based (reflecting ownership of the issuing entity) or debt based (reflecting a loan the investor has made to the issuing entity). If it is debt, it can be further categorised into short term (less than one year) or long term. Foreign Exchange instruments and transactions are neither debt nor equity based and belong in their own category.

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Financial instrument - Wikipedia, the free encyclopedia

http://en.wikipedia.org/wiki/Financial_instrument

A table
Combining the above methods for categorization, the main instruments can be organized into a table as follows: Asset Class Instrument Type Securities Other cash Exchange-traded derivatives Bond futures Options on bond futures OTC derivatives Interest rate swaps Interest rate caps and floors Interest rate options Exotic instruments

Debt (Long Term) Bonds >1 year

Loans

Debt (Short Term) Bills, e.g. T-Bills Deposits Short term interest rate futures Forward rate agreements Commercial paper Certificates of deposit <=1 year Equity Stock N/A Stock options Equity futures Stock options Exotic instruments Foreign exchange options Outright forwards Foreign exchange swaps Currency swaps

Foreign Exchange N/A

Spot foreign exchange Currency futures

Some instruments defy categorization into the above matrix, for example repurchase agreements.

The table below shows how to measure a financial instrument's gain or loss: Instrument Type Assets Assets

Categories Loans and receivables Available for sale financial assets

Measurement Amortized costs

Gains and losses Net income when asset is derecognized or impaired (foreign exchange and impairment recognized in net income immediately)

Deposit account - Fair Other comprehensive income (impairment recognized in net income value immediately)

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Financial instrument - Wikipedia, the free encyclopedia

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Off-balance-sheet issues

IFRS List - The online community about IFRS/IAS and Auditing (http://www.ifrslist.com/) Retrieved from "http://en.wikipedia.org/wiki/Financial_instrument" Categories: Financial markets This page was last modified on 21 June 2011 at 21:10. Text is available under the Creative Commons Attribution-ShareAlike License; additional terms may apply. See Terms of use for details. Wikipedia is a registered trademark of the Wikimedia Foundation, Inc., a non-profit organization.

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