A financial instrument is an investment that confers on its owner a claim on the income or change in value of the issuer, or some underlying component of the instrument. Several examples of financial instruments are as follows:
- Bonds represent a loan by the investor to the issuer, in exchange for a series of interest payments.
- Shares represent an ownership interest in the issuer.
- Derivative valuations are based on their underlying components, such as changes in a stock index.