Tradeable financial assets, or capital packages, are referred to as financial instruments. The effective movement and circulation of capital among investors all over the globe is made possible by the vast majority of financial instruments. These items may include hard currency, the right to receive or make a payment in hard currency or another financial instrument, or even a few shares of a company.
Asset ownership is reflected in equity-based financial instruments. Investors lend money to the asset’s owner using debt-based financial instruments. There is a third distinct category of financial instruments that are denominated in foreign exchange.
Financial instruments can be further classified into two asset classes in addition to the categories stated above. Debt-based and equity-based financial instruments are the two main types of monetary assets.