HYBRID
SECURITY
The two or more different financial instruments are combined
using the single financial security called the Hybrid
Security.The
hybrid the security is also known as 'hybrids'; which generally
combines both debt and equity characteristics.The most typical type
of hybrid security is a convertible bond.The convertible bond
having the features of ordinary bond.But , it is heavily influenced
by price movements of stack that which is convertible into.
Types Of Hybrid Securities:
- Preference Shares :- One of the common type of hybrid
security is convertible preference shares.At fixed or floating rate
this security pays dividends .The common stock dividend are payed
after the initial dividends pays
- Convertible Bonds:- Rather than regular bonds
the convertible bonds will provides greater potential for
appreciation.It pays only less interest than conventional
bonds.
- Sophisticated Investors:-In this security it is
difficult to define either debt or equity.The hybrid security are
being introduced all the time in a attempt to meet the needs of
sophisticated investors.
DERIVATIVE
SECURITY
A Derivative Security is an
financial security. It's value is derived from a group of assets or
underlying assets.The price of derivative security is determined by
fluctuation in underlying assets includes interest
rates,binds,stocks,currencies,etc.
Common derivatives includes Future Contracts, Options and Swaps
.
- Future Contracts:-There are the agreement between to
parties for the purchase and delivery of an asset at an agreed upon
price at a future date.
- Options:-These are the other common form of
derivative.It is similar to future contracts.It is agreement
between to parties to buy or sell an asset with a predetermined
future date for a specific date.
- Swap:-The another type of derivative that is often use
to swap one kind of cash flow with another is the swap
derivative