Terminology of capital market:
1. Pure Instrument: Equity shares, Preference shares and debenture or bonds which are issued with the basic charterstics without mixing the instruments are called Pure Instrument.
2. Hybrid Instrument : Those instrument which are created by combining the features of equity with bond, preference or equity shares is called as Hybrid Instrument. This is created in order to fulfill the needs of investors. For example: Convertible Preference Shares, Partial convertible debentures etc.
3. Derivative: are those instrument whose value is determined from the reference of other financial instruments. For example: future and option
4. Equity Shares: are those shares which refer to a part of ownership as a shareholder . These type of shareholder undertakes the maximum entrepreneurial risk associate with the business.
5. Preference shares: Sec. 85(1) of the Companies Act defines preference shares as those shares which carry preferential rights as the payment of dividend at a fixed rate and as to repayment of capital in case of winding up of the company. Thus, both the preferential rights include (a) preference in payment of dividend and (b) preference in repayment of capital in case of winding up of the company, must attach to preference shares
