Financial Instrument – the subject of an agreement that results in material and monetary obligations between the participants in the transaction for the acquisition/delivery of a certain commodity at a specified price at a certain time. When dealing with financial instruments, one can encounter concepts such as underlying and derivative assets, exchange-traded and over-the-counter, with floating (stocks, currency, commodities) and fixed income (bonds, bills), and according to execution terms (spot, futures, forwards, options).

Underlying and derivative assets are usually distinguished by their execution terms; the rules for buying and selling options and futures are calculated based on spot operations. At the same time, CFDs fully replicate the underlying asset dynamics but do not grant their owners any rights/obligations associated with possessing the actual asset (e.g., receiving dividends from stocks or the delivery/purchase of a commodity). Over-the-counter financial instruments offer greater flexibility regarding contract sizes and delivery terms than exchange-traded instruments. However, the downside of over-the-counter transactions arises from this same arbitrariness in making deals (possible insufficient protection of the transaction, lack of full transparency).

In other words, the underlying asset serves as the basis for calculating the price of the derivative asset.