Financial instruments can be either cash instruments or derivative instruments: • Cash instruments – instruments whose value is determined directly by the
markets. They can be
securities, which are readily transferable, and instruments such as
loans and
deposits, where both borrower and lender have to agree on a transfer. •
Derivative instruments – instruments which derive their value from the value and characteristics of one or more underlying entities such as an
asset,
index, or
interest rate. They can be
exchange-traded derivatives and
over-the-counter (OTC) derivatives. Some of the more common derivatives include
forwards,
futures,
options,
swaps, and variations of these such as
synthetic collateralized debt obligations and
credit default swaps. Some instruments defy categorization into the above matrix, for example
repurchase agreements. ==Measuring gain or loss==