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You're not right simply because you say you are. If we're going to talk about definition, tell me where you found yours. I'll help you with some I just googled,

You're not right simply because you say you are. If we're going to talk about definition, tell me where you found yours. I'll help you with some I just googled, that support my definition: > Financial instruments are assets that can be traded. [0] > Financial instruments are monetary contracts between parties. They can be created, traded, modified and settled. [1] And my point about about life insurances being financial instruments: > The asset classes are cash, vehicles, real estate, business, directly held equity, indirectly held equity, fixed income, pension equity, pension fixed income, cash value life insurance. [2] > Certain life insurance contracts accumulate cash values, which may be taken by the insured if the policy is surrendered or which may be borrowed against. Some policies, such as annuities and endowment policies, are financial instruments. [3] [0]: https://www.investopedia.com/terms/f/financialinstrument.asp https://www.investopedia.com/terms/f/financialinstrument.asp [1]: https://en.wikipedia.org/wiki/Financial_instrument https://en.wikipedia.org/wiki/Financial_instrument [2]: https://www.sciencedirect.com/topics/social-sciences/financial-instrument https://www.sciencedirect.com/topics/social-sciences/financi... [3]: https://en.wikipedia.org/wiki/Insurance#Life_insurance https://en.wikipedia.org/wiki/Insurance#Life_insurance

leesalminen 6y ago
So, if I'm holding un-vested RSUs in a tech start-up, it isn't a financial instrument because the monetary contract stipulates that I can't _trade_ it?
- TheNorthman 6y ago
  No, unvested RSUs are financial instruments for the same reason life insurance is. Your unvested RSUs accumulate cash-value over time and can be traded at the time of vesting. One might call them a derivative financial instrument. Regular insurance doesn't accumulate cash-value and therefor is not a financial instrument.
sailfast 6y ago
Sure, good point. I’ll bite. The first sentence Wikipedia “monetary contract between two parties” definition leaves out the trading bit you include from other places. Here’s what the Financial Accounting Standards Board says: (https://www.fasb.org/cs/ContentServer?c=Page&cid=1351027210037&d=Touch&pagename=FASB%2FPage%2FBridgePage https://www.fasb.org/cs/ContentServer?c=Page&cid=13510272100...) Imposes on one entity a contractual obligation either: A) To deliver cash or another financial instrument to a second entity B) To exchange other financial instruments on potentially unfavorable terms with the second entity. Conveys to that second entity a contractual right either: A) To receive cash or another financial instrument from the first entity B) To exchange other financial instruments on potentially favorable terms with the first entity. Sounds like insurance fits in this category. I die next week, you pay me a million dollars, and I’ve only paid you $100 (or whatever small premium) Furthermore, any agreement can be traded if someone sees an advantage in the trade and can rely on the agreement to hold. Just because someone’s not doing the trade doesn’t mean it’s not trade-able. I guess it could be explicitly prohibited but even then I could see a Dane in the above insurance example securing a home loan because they have this insurance, and would be able to pay out upon death (for example) as a normal thing.

leesalminen 6y ago

So, if I'm holding un-vested RSUs in a tech start-up, it isn't a financial instrument because the monetary contract stipulates that I can't _trade_ it?

TheNorthman 6y ago
No, unvested RSUs are financial instruments for the same reason life insurance is. Your unvested RSUs accumulate cash-value over time and can be traded at the time of vesting. One might call them a derivative financial instrument. Regular insurance doesn't accumulate cash-value and therefor is not a financial instrument.

sailfast 6y ago

Sure, good point. I’ll bite. The first sentence Wikipedia “monetary contract between two parties” definition leaves out the trading bit you include from other places. Here’s what the Financial Accounting Standards Board says: (https://www.fasb.org/cs/ContentServer?c=Page&cid=1351027210037&d=Touch&pagename=FASB%2FPage%2FBridgePage https://www.fasb.org/cs/ContentServer?c=Page&cid=13510272100...) Imposes on one entity a contractual obligation either: A) To deliver cash or another financial instrument to a second entity B) To exchange other financial instruments on potentially unfavorable terms with the second entity. Conveys to that second entity a contractual right either: A) To receive cash or another financial instrument from the first entity B) To exchange other financial instruments on potentially favorable terms with the first entity. Sounds like insurance fits in this category. I die next week, you pay me a million dollars, and I’ve only paid you $100 (or whatever small premium) Furthermore, any agreement can be traded if someone sees an advantage in the trade and can rely on the agreement to hold. Just because someone’s not doing the trade doesn’t mean it’s not trade-able. I guess it could be explicitly prohibited but even then I could see a Dane in the above insurance example securing a home loan because they have this insurance, and would be able to pay out upon death (for example) as a normal thing.