Financial Instrument

1. A financial instrument is cash, foreign currency, demand deposits, evidence of an ownership interest in an entity (stock certificates, partnership interests, and limited liability company interests), and contracts that result in an exchange of cash or ownership interests in an entity. Contracts either (1) impose on one entity a contractual obligation to deliver cash or another financial instrument to a second entity or to exchange other financial instruments on potentially unfavorable terms with the second entity or (2) convey to that second entity a contractual right to receive cash or another financial instrument from the first entity or to exchange other financial instruments on potentially favorable terms with the first entity. Financial instruments include derivatives. See also derivative. An instrument having monetary value (e.g., bond).