Hybrid securities are financial instruments that combine features of both debt and equity. They typically offer investors fixed interest payments like bonds, but they may also provide the potential for capital appreciation, similar to stocks. This dual nature makes them appealing to investors seeking a balance between risk and return. Common examples of hybrid securities include convertible bonds and preferred shares. Convertible bonds can be transformed into a predetermined number of company shares, while preferred shares often come with fixed dividends and priority over common shares in the event of liquidation. These characteristics make hybrid securities versatile investment options.