What Is a Security?

A security is a financial instrument that represents an ownership stake in a company, debt obligation or other asset. It can be traded on public exchanges and over-the-counter markets. Securities are typically issued by governments, corporations and other entities to raise capital for their operations. They may also be used as collateral for loans or investments.

Securities come in many forms including stocks, bonds, options, futures contracts and derivatives. Stocks represent equity ownership of a company while bonds represent debt obligations with fixed interest payments over time. Options give the holder the right but not the obligation to buy or sell an underlying asset at a predetermined price within a certain period of time while futures contracts are agreements to buy or sell an underlying asset at some point in the future at an agreed upon price today. Derivatives are complex securities whose value is derived from another security such as stock index futures which track changes in stock market indices like the S&P 500 Index

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