what is an instrument 
an instrument is a means by which something of value is transferred held or accomplished in the field of finance an instrument is a tradable asset or a negotiable item such as a security commodity derivative or index or any item that underlies a derivative in separate contexts an instrument can alternatively refer to an economic variable that can be controlled or altered by government policymakers to effect a change in other economic indicators it can also refer to a legal document such as a contract will or deed understanding instrumentsinternational accounting standards ias defines financial instruments as any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity basically any asset purchased by an investor can be considered a financial instrument antique furniture wheat and corporate bonds are all equally considered investing instruments in that they can all be bought and sold as things that hold and produce value instruments can be debt or equity representing a share of liability a future repayment of debt or ownership an instrument in essence is a type of contract or medium that serves as a vehicle for an exchange of some value between parties the values of cash instruments financial securities that are exchanged for cash like a share of stock are directly influenced and determined by markets these can be securities that are easily transferable the value and characteristics of derivative instruments are derived from their components such as an underlying asset interest rate or index 