What is an Asset?

We usually think of assets as stocks, bonds, bank accounts, real estate, mutual funds, and other securitized instruments. Stocks are documents that grant rights to their owners, rights that relate to a particular company.

• Companies are legal entities recognized by federated corporations (countries, states, municipalities, each other, persons, …)
– Hard assets (equipment, factories, …)
– Soft assets (processes, patents, secrets, …)
– Operate in uncertain markets, thus have risk
– Risk needs to be divided and shared, to reduce it

• Companies thus sell financial instruments (virtual assets, ideas)
– Stocks and Bonds, for “Cash” or “Credit”

• Cash is a Promissory note to pay some form of value (capital)

• Value is “created” by the signatures of the executors
– Exchanged for either “shares” or “promise of coupon”
– Shares pay dividends and / or have “growth”
– Bonds pay interest and have “stability”
– Promise of future performance determines market value of instruments

• This is real value as perceived by the prospective buyers of stocks / bonds
- We call this expected value

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