The basic characteristics of financial instruments are as follows:

1. Term: Financial instruments usually have a specified repayment period.

2. Liquidity: Financial instruments have the ability to be converted into cash when necessary without suffering losses.

3. Risk: There is a possibility of loss in the principal amount and predetermined income of purchasing financial instruments.

4. Profitability: The characteristic that financial instruments can bring value appreciation. The specific characteristics of different financial instruments vary.

A financial instrument refers to a contract that forms a financial asset of one party and a financial liability or equity instrument of another party. Financial instruments include financial assets, financial liabilities and equity instruments. Financial instruments are divided into basic financial instruments (such as bonds, stocks, etc.) and derivative instruments (such as futures, options, swaps, etc.).

Types of financial instruments

Financial instruments are classified in different ways: according to the term, they are divided into short-term financial instruments and long-term financial instruments; according to the financing form, they are divided into direct financial instruments and indirect financial instruments; according to rights and obligations, they are divided into creditor and debt financial instruments and ownership financial instruments; according to whether they are related to direct credit activities, they are divided into primary financial instruments and derivative financial instruments.

1. According to the term, they are divided into short-term financial instruments and long-term financial instruments. Short-term financial instruments refer to various financial instruments with a repayment period of one year or less, including bills, IOUs, short-term treasury bills, etc. Long-term financial instruments refer to financial instruments with a repayment period of more than one year, such as long-term debt, stocks, etc. Stocks and bonds are products of socialized large-scale production, and at the same time, they further promote the development and growth of socialized large-scale production.

2. According to the financing form, it is divided into direct financial instruments and indirect financial instruments. Direct financial instruments refer to instruments used in direct financing activities, such as commercial paper, public bonds and treasury bills, corporate bonds and stocks, and mortgage deeds issued and signed by enterprises, governments or individuals. Indirect financial instruments refer to instruments used in indirect financing activities involving financial intermediaries, such as bank notes, deposit certificates, bank bills and insurance policies.

3. According to rights and obligations, they are divided into creditor and debt financial instruments and ownership financial instruments. Debt financial instruments reflect the creditor-debt relationship, such as bonds; ownership financial instruments reflect ownership relationships, such as stocks.

4. According to whether they are directly related to credit activities, they are divided into primary financial instruments and derivative financial instruments. Native financial instruments, also known as basic financial instruments, are financial instruments that are generated on the basis of the development of the commodity economy and directly serve the production and circulation of commodities. They mainly include credit and debt certificates such as commercial bills and bonds, and ownership certificates such as stocks and funds.

Derivative financial instruments are a general term for various financial contracts and their combinations derived from original financial instruments, mainly including forwards, futures, options, swaps and their combinations.