Financial instruments are also called "credit instruments" or "trading instruments". When the department with insufficient funds borrows funds from the department with sufficient funds or the issuer raises funds from investors, a written document made in a certain format clarifies the obligations of the debtor and the rights of the creditor, which is a legally binding contract.
Financial instruments are the objects of financial market transactions, which are produced and developed with the development of credit relations. Modern complex financial relations, it is impossible to do things by verbal agreement. False statements can easily lead to disputes, which can not transfer and circulate creditor's rights or ownership in the market. In order to meet various forms of credit demand, financial instruments such as commercial bills, bank certificates of deposit, stocks and bonds have emerged.
Any financial instrument has a dual nature: it is a debt to the instrument issuer (borrower); For investors (lenders), it is a financial asset. Each financial instrument has its own special contents to meet the different needs of transactions, but some contents are common, such as: face value, issuer's (drawer's) signature, term, interest rate (simple interest or compound interest) and so on.
Financial instruments refer to financial assets that can be traded in the financial market, and are written documents to prove the balance of funds between borrowers and borrowers. The most basic elements are the amount paid and the terms of payment.
Financial instruments such as stocks, futures, gold, foreign exchange and insurance policies are also called financial products, financial assets and securities. Because it is a product that can be bought and sold in the financial market, it is called a financial product; Because they have different functions and can achieve different purposes, such as financing and hedging, they are called financial instruments. In the qualitative and classification of assets, they belong to financial assets, so they are called financial assets; They are legal documents that can prove the relationship between property rights and creditor's rights and debts, so they are called marketable securities. Most financial instruments or products, assets and securities have different degrees of risk.