The essence and classification of financial instruments

Abstract

The article presents the key stages of the evolution of financial instruments, namely: The Ancient World and the Middle Ages: the emergence of debt and credit; The Renaissance and the Great Geographical Discoveries: the emergence of the first types of securities; Modern times: the formation of stock markets and the first derivatives; The Industrial Revolution and the 20th century: the emergence of mass securities markets and their regulation; the era of globalization and digital technologies. The interpretation of the term "financial instruments" by domestic and foreign scholars is grouped. Certain shortcomings are highlighted, as well as key aspects of the study of various scientific approaches to the definition of the concept of «financial instruments», such as: legal approach: focused on documents and contracts confirming ownership or a claim; economic approach: considers financial instruments as means of capital redistribution and risk management; accounting approach: financial instruments are classified for accounting and reporting purposes; functional approach: focuses on the functions performed by the instrument (for example, raising funds, hedging, speculation). The author's proposed classification of financial instruments: by type of instrument: primary (basic) financial instruments, ownership instruments (shares), debt instruments (bonds, promissory notes), derivative financial instruments (derivatives); by nature of rights and obligations: financial assets, cash and cash equivalents, contractual right to receive cash, contractual right to exchange financial instruments, equity instrument, financial liabilities, contractual obligation to transfer cash, contractual obligation to exchange financial instruments, equity instruments; by maturity: short-term: up to one year (promissory notes, commercial papers), long-term: over one year (bonds, shares); by market: money market instruments: short-term, highly liquid instruments used for liquidity management, capital market instruments: long-term instruments designed to raise capital and the author's definition of the concept of «financial instruments» is given - a wide range of legal documents or virtual obligations that certify certain rights and obligations between two or more parties and are used to carry out transactions in the financial market. The focus is on the list of the main key functions performed by financial instruments. The main aspects of the legal regulation of financial instruments are grouped, including laws, regulations and institutions aimed at ensuring stability, transparency and protecting the rights of investors in financial markets.