Name: Marinella A.

Losa
Year & section:BSA-2B
Date:10/06/20

                              Synthesis -  Financial Instruments

Financial instrument us a monetary contract between parties. It is an asset or package of

capital that we trade. In other words, we can buy and sell it. There are two kinds of the
financial instruments, the primary instruments and the derivative financial instruments.
The primary instruments are the financial assets, financial liabilities, and equity
instruments. In the primary instruments, all of the cash on hand and cash in banks are
included on it as well the liabilities and equity. While the derivatives are financial
instruments that derive their value from something else, or derive their value on
contractually required cash flows from some other security or index. The examples of
the derivative financial instruments are; future contracts, forward contracts, call
options, foreign currency, and interest rates swaps.

Last meeting the discussion solely focuses on only two of the following derivatives and
these are; future contracts or speculating and forward contracts or hedging risks. The
future contract is an argument between a seller and a buyer that requires the seller to
deliver a particular commodity at a designated future date at a predetermined price.
These contracts are actively treated on regulated future exchange and generally referred
to us “commodity futures contract”. And all the items that are in the future contracts
are all marketable. It is something that is bought not only for personal consumption but
also for sale. While forward contracts are contracts that is similar to future contracts but
differs in three ways. First it calls for delivery on a specific date, whereas a future
contracts permits the seller to decide later which specific date within a specified month
will be the delivery date. Second the transactions made in this type of contract are only
for personal benefit or consumption and not fit for sale. And third the price settlement
in this contract is already stable because even before the contract had been officially
agreed the prices of commodities between the seller and the buyer has been done
within their terms even if there is a rise or fall of prices in the market on or before the
delivery date.

In simple words Financial instruments are the one that acts or binds parties on a
contracts that involves their monetary concerns and contributions. And it also serve as
the security of each parties to be able to secure their profits or file cases in case of future
or possible breaches upon the contract agreed.