Cash Instruments Law and Legal Definition

Cash instruments are financial instruments whose value is ascertained directly by markets. Cash instruments can be classified into two types as securities and other cash instruments such as loans and deposits. Securities are readily transferable, whereas loans and deposits can be transferred only when both borrower and lender agrees for the transfer. Cash instruments often offer complete capital security, but subject to credit risk. As a result, the capital value of cash instruments will not fluctuate if interest rates fluctuate. Since cash instruments are highly liquid, it can be used by institutions with very long-term liabilities, to meet their immediate cash flow needs.