Simply put, financial instruments are assets that hold value and can be traded. However, financial assets need not be physical items. For example, ownership of a company can be considered to be an asset. There are two types of financial instruments: Securities and Futures.

 

Securities are financial assets whose values are negotiable and can be traded for other goods.However, since this definition is very broad, there are two types of securities: Debts and Equities. This will be covered in the sub-topic 1.1 "Securities".

 

Futures are contracts or an obligation to buy an sell an asset at a future date at a specified time. The most common type of futures are commodities. Commodities are basically natural resources like oil, wheat, barley, corn etc. An example of a commodities future would be a contract to buy oil at $50 at midnight tomorrow. However, since this topic is too complex to cover, it would not be presented here.

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