Financial markets and investment banking categorize tradeable financial instruments into four primary asset classes based on their legal structure and economic characteristics. The first is equity securities, representing fractional ownership shares in a corporation, such as common and preferred stock. The second is debt securities, encompassing fixed-income instruments like government bonds, municipal notes, and corporate debentures that pay regular interest. The third is derivative securities, financial contracts whose value depends on an underlying asset, including options, futures, and swaps. The fourth is hybrid securities, combining characteristics of both debt and equity, such as convertible bonds or preference shares that offer flexible investment terms.