Legal Definitions - financial instrument

A financial instrument is a type of document or contract that has a value related to money. It can be used to record a financial transaction or to represent an asset or liability. Examples of financial instruments include:

• Stocks: These are shares of ownership in a company. When you buy a stock, you become a part owner of the company and can make money if the company does well.
• Bonds: These are loans that you make to a company or government. They pay you interest and then return your money at a later date.
• Options contracts: These are agreements that give you the right to buy or sell a stock at a certain price. They can be used to make money if the stock price goes up or down.

These examples illustrate the definition of financial instruments because they all have a value related to money and can be used to represent an asset or liability. Stocks represent ownership in a company, bonds represent a loan, and options contracts represent the right to buy or sell a stock. All of these instruments can be bought and sold on financial markets, and their value can change based on various factors such as supply and demand, interest rates, and company performance.