An asset that has no physical characteristics, but rather derives its value from a monetary basis (monetary asset such as cash or cash equivalent– bank deposit) or contractual claim (securities: bonds and stocks). The contractual claim gives a holder the right to receive an amount of money (cash or otherwise) or another financial asset from another party or to exchange financial assets/ financial liabilities with another party under favorable conditions.
A financial asset may also be a contract whose settlement may affect the holder’s own equity, whether it is a derivative contract or non-derivative contract.
- Derivative contract: whose settlement doesn’t involve the exchange of cash/ financial asset for a fixed number of the holder’s own equity instruments.
- Non-derivative contract: that involves an obligation on the holder to receive a variable amount of its own equity instruments.
Financial assets are by nature more liquid than tangible assets, such as inventory items (goods, commodities, materials, etc.) or real estate (land, buildings, etc.), and are usually marketable or negotiable (can be traded on financial markets- exchanges or OTC).
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