Classification of Assets

Assets can be classified as Financial Assets and Real Assets.

Financial assets entail securities, derivative contracts and currencies. Real Assets include Commodity, Equipment, Real Estate, Machinery and other physical assets.

Financial securities can be classified as debt or equity. Debt securities (also known as Fixed-income securities) are the commitments to repay the borrowed money. Debt securities include Bonds, notes payables, commercial papers, bills, and certificates of deposits. Equity securities represent ownership in the firm. Examples of equity securities include Common stocks, preferred stocks and warrants.

Public securities are traded on exchanges through securities dealers and are subject to regulatons (by SEBI). Securities that are not traded in public markets are referred to as Private Secuirities, which cannot be quickly or easily converted into cash and are not subjected to regulations.

Derivative contracts are the contracts that have values that are derived from the values of other assets (underlying assets). Financial derivative contracts are based on equities, debts or other financial contracts. Physical derivative contracts derive their values from the value of physical assets such as gold and oil.

Commodities include industrial metals, pricious metals, agriculture products, energy productsand credits for carbon reduction.


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