Different Instruments in the Secondary Market
The aftermarket trades on different instruments can be categorised into three types,
1. Fixed Income Instrument: These types of instruments are investments that generate fixed income or regular income. For instance, the monthly interest and on maturity the principal amount. Debentures and bonds are also a form of fixed-income instruments.
2. Variable Income Instrument: As the name suggests variable, means not fixed. These investments do not guarantee a fixed income, rather the market decides the variable returns. These instruments are highly risky but can generate high returns. Examples include equity and derivatives investment.
3. Hybrid Instrument: Some instruments which provide both fixed and variable returns are termed hybrid instruments. If an investor invests in these forms of instrumentation, then he/she might generate either high or low returns but a fixed amount will always generate. An example of the hybrid instrument is the convertible debenture which is primarily a debt security but can be converted into equity shares after some time.
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