Types of Assets (Finance)
What you could expect from a balance sheet.
- entity
- company
- partnership
- trust
- Balance Sheet
- Asset: a resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide a future benefit.
- Intangible assets: economic resources that have no physical presence.
- patents
- trademarks
- copyrights
- goodwill
- Current Assets: short-term economic resources that are expected to be converted into cash within one year.
- cash
- cash equivalents
- accounts receivable
- inventory
- prepaid expenses
- Fixed Assets: long-term resources, such as plants, equipment, and buildings.
- Financial Assets: represent investments in the assets and securities of other institutions.
- Alias
- When treated as something owned: “Financial Assets” – assets that can be traded.
- When treated as something exchanged: “Financial Instruments” – monetary contracts between parties.
- https://marketbusinessnews.com/financial-glossary/financial-instrument/
- Types
- Classifications
- by how they are valued
- Cash instruments are instruments that the markets value directly
- Others
- debt-based
- Short-term
- certificates of deposit (CDs)
- Deposits
- Long-term
- Loans
- Foreign Exchange Instruments
- Spot foreign exchange
- Securities: a thing deposited or pledged as a guarantee of the fulfillment of an undertaking or the repayment of a loan, to be forfeited in case of default.
- Classified by nature
- Equity security (“stocks”): represents shareholders’ ownership interest in an entity.
- common stock
- preferred stock (preferred equity)
- Debt security: represents money that is borrowed and must be repaid, with terms that stipulates the size of the loan, interest rate and maturity or renewal date.
- collateralized securities
- as “securities”
- Asset-backed security (ABS): pools assets; resells them to investors.
- (Usually we mean non-mortgage assets)
- Mortgage-backed security (MBS): assets are mortgage(s).
- (Technically a kind of ABS.)
- as “structured products” (as in structured finance)
- Collateralized debt obligation (CDO): pools together cash flow-generating assets and repackages this asset pool into discrete tranches that can be sold to investors.
- Collateralized loan obligation (CLO): Assets are loans.
- Collateralized mortgage obligation (CMO): contains a pool of mortgages bundled together and sold as an investment.
- Short-term
- bills
- T-bills
- Commercial paper
- Long-term
- Bonds
- government bonds
- Corporate bonds
- Hybrid security
- Marketable securities: to be sold or redeemed within a year -> can be easily converted to cash.
- Derivative instruments (“derivatives”) are instruments whose worth we derive from the value and characteristics of at least one underlying entity.
- Classified by whether their trading happens at exchanges
- Exchange-traded derivatives (ETD): traded via exchanges
- debt-based
- Long-term
- Bond futures
- Options on bond futures
- Short-term
- Short-term interest rate futures
- equity-based
- Stock options
- Equity futures
- Foreign exchange instruments
- Currency futures
- Over-the-counter (OTC) derivatives: traded (and privately negotiated) directly between two parties, without going through an intermediary.
- debt-based
- Short-term
- Forward rate agreements
- Long-term
- Interest rate swaps
- Interest rate caps and floors
- Interest rate options
- Exotic derivatives
- equity-based
- Stock options
- Exotic derivatives
- Foreign exchange instruments
- Foreign exchange options
- Outright forwards
- Foreign exchange swaps
- Currency swaps
- Types
- option is a contract which gives the buyer (the owner or holder of the option) the right, but not the obligation, to buy or sell an underlying asset or instrument at a specified strike price prior to or on a specified date, depending on the form of the option.
- by asset classes
- debt-based: reflect a loan the investor made to the issuing entity
- Short-term
- Long-term
- equity-based: reflect ownership of the issuing entity
- Securities under equity-based financial instruments are stocks
- Neither:
- Transactions
- Foreign Exchange Instruments
- Liability
- ...
- certain Derivatives
- Upcoming Payroll
- Bonuses
- Contracts
- Debt: an amount borrowed
- bank loans
- bonds
- corporate bonds
- government bonds
- (Certain Types Of) Leases
- Legal Settlements
- Payments To Vendors
- Required Stock Redemptions