Financial instruments are the monetary contract between parties which can be created, modified, traded, and settled. In other words, financial instruments are tradable assets or negotiable items which underlie a derivative. Financial instruments can be transferred, held, or accomplished. Financial instruments can be currency, share, bond, security, commodity, etc. Financial instruments can be of two types 1. Cash Instruments The value of cash instruments is determined directly by the market. Cash instruments can be securities which are readily transferable and loans and deposits where both borrower and lender agree on the transfer. 2. Derivative Instruments The value of derivative instruments is derived by the value and characteristics of one or more underlying asset such as index, or any other asset. They can be exchange-traded derivatives or over the counter (OTC) derivatives. In simple terms, any asset which is purchased by an investor can be considered as a financial instrument. These assets can be furniture, antique, corporate bond, commodity, etc. They all can be bought and sold and are equally considered as investing instruments. A tradable instrument is a type of contract that serves as a medium for the exchange of some values between parties. It can be debt or equity.