Financial Instruments are intimidating at first.
They have complicated names and millions of different ones seem to exist. This textbook will show that they are all made of a few basic components. By simply re-arranging these components, new financial instruments emerge. Essentially all financial instruments are an exchange of cashflows. These cashflows can vary in their amounts, uncertainty and timing. That is it.
This textbook will go through many financial instruments and give each one a simple explanation and a cashflow diagram. The cashflow diagrams can be used to compare different financial instruments and you will soon notice how similar these instruments are to each other. This will then allow you to understand the key differences.
They have complicated names and millions of different ones seem to exist. This textbook will show that they are all made of a few basic components. By simply re-arranging these components, new financial instruments emerge. Essentially all financial instruments are an exchange of cashflows. These cashflows can vary in their amounts, uncertainty and timing. That is it.
This textbook will go through many financial instruments and give each one a simple explanation and a cashflow diagram. The cashflow diagrams can be used to compare different financial instruments and you will soon notice how similar these instruments are to each other. This will then allow you to understand the key differences.
