A corporation that has issued common or preferred stock has created what type of financial instrument?

When a corporation issues common or preferred stock, it creates a financial instrument known as outstanding equity. This type of equity represents ownership in the company and entitles shareholders to claim on the assets and earnings of the corporation. Common stock typically offers voting rights and potential dividends, while preferred stock provides a fixed dividend and a higher claim on assets in the case of liquidation but usually lacks voting rights.

Outstanding equity reflects the portion of the company's capital that is funded by investors in exchange for ownership stakes, which is distinct from debt securities that involve borrowing funds and repaying them with interest. Equity options, on the other hand, are financial derivatives that give investors the right but not the obligation to purchase or sell stock at a predetermined price. Convertible bonds are debt instruments that can be converted into a specified number of shares of common stock, representing a hybrid between debt and equity but are not classified as outstanding equity themselves.

Hence, the issuance of common or preferred stock specifically results in the creation of outstanding equity, distinguishing it from other financial instruments that involve different structures and obligations.