Financial instruments representing ownership (equity) or a loan (debt) form the foundation of capital markets. These instruments, essential for companies to raise capital and for investors to participate in economic growth, are broadly known as securities. Examples include common stock, preferred stock, corporate bonds, and government bonds.
These instruments are crucial for facilitating capital allocation within an economy. Businesses use them to fund operations, expansion, or acquisitions. Investors utilize them to diversify their portfolios, seek potential returns, and manage risk. Historically, the development and standardization of these instruments have significantly contributed to the efficiency and scale of modern financial markets.
