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Financial Instruments

In: Business and Management

Submitted By kanwar
Words 291
Pages 2
New financial instruments are necessary tools because of our ever-changing financial environment. Factors such as industry and financial markets globalization, tax asymmetries, technological advances, etc. have created a need for various types of financial instruments. The purpose of this paper is to provide a brief description of how financial instruments relate to the field of Finance and Seminar in Finance, and to also examine more thoroughly six particular instruments that have been developed.
Financial instruments belong in the Investments and Corporate Finance sub-fields of Finance. As we have learned, the Investments sub-field has one objective—to maximize an investor’s return/wealth. Financial instruments have the ability to accomplish this goal. In fact, numerous instruments/innovations have been developed for this purpose, a few of which will be mentioned in the latter portion of this paper. Instruments are also vital to the sub-field of Corporate Finance. The goal of Corporate Finance is to maximize shareholder wealth. By developing instruments that will help a corporation with its costs, shareholder wealth can possibly be increased. Many times instruments are designed by financial engineers to obtain funds that are essential to the operation of businesses, which makes firms more efficient. “The nature of financing required or cost considerations dictate a special instrument…or a combination of instruments to be used in concert.” (Marshall)
The three pillars of finance are also relevant when discussing financial instruments. For example, new instruments can be created as a result of continuous changes in regulations. They have the capacity to exploit various discrepancies within regulations. In fact, financial engineers are known for finding such loopholes and using them to their advantage. Technology is also a key factor in

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