Hybrid Investment

Hybrid investments, also known as derivatives or just hybrids, are a form of investment that combines equity and debt features, allowing companies to protect themselves against financial risks in securities transactions. This form of investment is essential for traders and investment professionals to branch out their portfolio assets.

For a majority of businesses in this modern economic situation, counting on the stability of a financial transaction is not always a viable option. Hybrid Investments work to maintain a sense of security for both the business and investor.

Types of Hybrid Investments

The two most popular types of Hybrid Investments are Preferred Stock and Convertible Bonds.

Preferred Stocks – Stockholders acquire dividend payments on a regular basis and gain funds when share values rise on security exchanges.

Convertible Bonds – Bondholders periodically receive interest payments. An exchange of bonds for a specified number of equity shares is acceptable, but only in accordance with the convertible bond covenant.

Hybrid investments are essential to our current economic transactions. Investors buying these products generally wish to accumulate periodic fixed-interest payments and profit when share prices rise in financial markets. New types of Hybrid Investments are constantly being introduced to meet the needs of professional investors.

References

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1. http://www.answers.com/topic/hybrid-investment-security
2. http://www.investopedia.com/terms/h/hybridsecurity.asp