As professional financial experts, we specialize in designing, structuring, and issuing a diverse range of financial instruments through our affiliated entities to address the unique challenges and preferences of our esteemed clients.
These instruments facilitate the seamless flow and transfer of capital globally, fostering economic growth and development. They can also serve as a means of securing financing for various projects, ensuring the successful completion of ventures across industries.
Financial instruments can encompass a wide array of assets, including cash, contractual rights to deliver or receive cash or other financial instruments, or evidence of ownership in an entity. They may take the form of tangible or intangible documents, embodying legal agreements with inherent monetary value. These instruments can generally be classified into equity-based or debt-based categories.
- Equity-based financial instruments: These instruments signify ownership interests in a particular asset, enabling investors to participate in the growth and profitability of the underlying entity.
- Debt-based financial instruments: These instruments represent loans extended by investors to the asset owners, entitling them to interest payments and principal repayment as specified in the lending agreement.
In addition to these primary categories, our offerings encompass foreign exchange instruments, which facilitate currency conversions and international transactions, as well as various other specialized instruments, such as:
- Bank Guarantees (BG): These instruments serve as a guarantee from a bank, ensuring the fulfillment of a debtor's obligations to a creditor in the event of non-payment or default.
- Standby Letters of Credit (SBLC): These instruments function as a secondary payment method, offering a financial safety net for transactions between parties.
- Notes, including Medium Term Notes (MTNs): These debt instruments have a fixed maturity period, providing borrowers with a source of financing and investors with a predictable income stream.
- Or any creative combination of those and with a multitude of underlyings (including exotic underlyings).
Our expertise lies in tailoring these financial instruments to meet the diverse needs of our clients, ensuring they achieve their financial objectives and contribute to the global flow of capital.
- The values of cash instruments are directly influenced and determined by the markets. These can be securities that are easily transferable.
- Cash instruments may also be deposits and loans agreed upon by borrowers and lenders.
- The value and characteristics of derivative instruments are based on the vehicle’s underlying components, such as assets, interest rates, or indices.
- An equity options contract, for example, is a derivative because it derives its value from the underlying stock. The option gives the right, but not the obligation, to buy or sell the stock at a specified price and by a certain date. As the price of the stock rises and falls, so too does the value of the option although not necessarily by the same percentage.
- There can be over-the-counter (OTC) derivatives or exchange-traded derivatives. OTC is a market or process whereby securities–that are not listed on formal exchanges–are priced and traded.
Types of Asset Classes of Financial Instruments
Financial instruments can be categorized based on their asset class, which is typically determined by whether they are debt-based or equity-based.
Debt-Based Financial Instruments
Debt-based financial instruments can be further classified into short-term and long-term instruments.
- Short-term debt-based financial instruments: These instruments have a maturity of one year or less and include securities such as Treasury bills (T-bills) and commercial paper. Cash equivalents in this category encompass deposits and certificates of deposit (CDs). Exchange-traded derivatives include short-term interest rate futures, while over-the-counter (OTC) derivatives feature forward rate agreements.
- Long-term debt-based financial instruments: These instruments have a maturity of more than one year. Securities in this category consist of bonds, while cash equivalents include loans. Exchange-traded derivatives comprise bond futures and options on bond futures. OTC derivatives encompass interest rate swaps, interest rate caps and floors, interest rate options, and exotic derivatives.
Equity-Based Financial Instruments
Equity-based financial instruments involve ownership stakes in assets. Securities in this category include stocks. Exchange-traded derivatives consist of stock options and equity futures. OTC derivatives feature stock options and exotic derivatives.
Special Considerations: Foreign Exchange Instruments
Foreign exchange instruments warrant special attention as they do not have securities. Cash equivalents in this category are represented by spot foreign exchange, reflecting the current prevailing rate. Exchange-traded derivatives include currency futures, while OTC derivatives consist of foreign exchange options, outright forwards, and foreign exchange swaps.
Do you want to read more to understand how Financial Instruments are calculated ?
The Handbook of Financial Instruments
Mathematics of the financial Markets
Financial Instruments and Derivatives Modelling, Valuation and Risk Issues
Mastering financial Calculations
A step-by-step guide to the mathematics of financial market instruments