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Capital Market: Instruments

The instruments issued in capital markets are listed below:

Shares:

Share is the share in the share capital of the company.Share is one of the units into which the capital of company is divided. A person having the shares of the company is called as shareholder of that company, He is regarded as the part of owner of the company.

There are 2 types of shares:

  • Equity shares
  • Preference shares

Debentures

Debentures are long term borrowed funds of the company. They have fixed maturity period as well as fixed interest rate. These are the certificates issued under common seal of the company.

Bonds

Bonds are the long term borrowed funds of the government and also companies. Like debentures have fixed maturity and fixed interest rate even bonds have. Here interest charged on bonds termed as coupon rate.

Derivatives

These are instruments that derive from other securities, which are referred to as underlying assets. The price, riskiness and function of the derivative depend on the underlying assets since whatever affects the underlying asset must affect the derivative.

Some examples of derivatives are:

  • Futures
  • Options
  • Swaps

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