Securities are widely used in various spheres of economic life. Over time, they have become one of the most important attributes and mechanisms that allow a market economy to function.
Concept and types of securities
A security is a special product that has no monetary or material use value, which circulates on its own market. Their concept is quite multifaceted, since they are neither a service, nor a specific physical product. Their essence is to provide the owner with rights to capital, which he physically does not have.
All securities are divided into two groups - basic and derivatives. The main ones imply the presence of property rights to any asset, and derivatives are a non-documentary form of expression of these rights.
The group of basic securities includes shares, bills of exchange, bonds, and also certificates of deposit. Shares secure the rights of shareholders to receive a specific share of the profits from the joint stock company. Promissory notes are a written commitment that allows the holder to demand payment of a specified amount from the issuer of the promissory note. The bond acts as a guarantee for the investor of payment of the amount and interest by the issuer. Certificates of deposit certify the rights of depositors to receive deposit funds.
The list of derivatives includes financial futures and options. A financial futures is a contract in which an investor agrees to sell or buy from a counterparty a specified amount of a commodity. Options transfer the rights to sell or buy assets at a specified price at a specified date in the future.
Properties and functions of securities
A security is a form of existence of capital, different from its commodity or monetary manifestation, which can circulate in the markets and make a profit. Securities have many properties, among which the following are worth highlighting:
- negotiability - the ability to buy and sell on the markets;
- seriality - the issue of securities is possible in homogeneous series and classes;
- documentary - securities are a document, therefore, must contain all the necessary details;
- recognition - stock instruments are considered securities only if they are recognized by the state;
- liquidity - a security can be quickly sold and converted into cash;
- Obligation - refusal to fulfill obligations expressed by securities is prohibited by law.
Securities are considered a very important instrument, as they redistribute funds among various sectors and spheres of the economy, and also provide their holders with some additional rights. Among other things, securities are capable of providing capital gains or returns.
