As described in Book 1, cash markets involve direct trading in securities and other types of assets.3 Securities are fungible, legal instruments that themselves represent the ownership of a financial asset—most often equities or debt instruments. Cash markets, as we define them, also involve trading in commodities and currencies. Cash instruments then include equities, fixed income, currencies, and commodities (see Figure 3.1).
Figure 3.1 Cash instruments provide actual ownership of financial assets and commodities to participants in the trading markets.
Equities represent an ownership interest in a productive asset, ...