A financial instrument reflects a claim on what is known as
an underlying.
Financial instruments can be direct
claims on earnings - as in stocks (aka
shares outside the
United States) - which effectively reflect
ownership of the associated
company. In this case, the
underlying is the firm that issued the stocks.
They can also be claims on
cash flows. A fixed income instrument such as a
bond allows its
owner to receive cash flows at predetermined times during the
life of the instrument.
There are also a wide class of instruments known as
contigent claims;
derivatives such as
Options or
Futures fall into this category.
Contingent claims do not reflect definitive ownership of the
underlyng instrument; instead the owner may elect to take possession at their option.