underlying asset

(redirected from Underlying Commodity)

Underlying asset

The security or property or loan agreement that an option gives the option holder the right to buy or to sell.

Underlying Asset

In a derivative or warrant, the security, property, or other asset that gives value to the derivative or warrant. For example, in an option giving one the right to buy stock in Johnson and Johnson, the underlying asset is the stock in Johnson and Johnson. An underlying asset may many things, such as a physical commodity, a security, a piece of land, or part of a business.

underlying asset

1. The physical and financial asset to which a security holder or a class of security holders has a claim. An analyst may believe that a stock is underpriced on the basis of the value of the firm's underlying assets and the potential earning power of those assets.
2. The asset that underlies and gives value to a security. The underlying asset of a stock option is the stock that the option can be used to purchase. Likewise, the underlying asset of a convertible bond is the stock for which the bond can be exchanged. The market value of a security is directly affected by changes in the value of any underlying asset into which it may be exchanged.
References in periodicals archive ?
That price seems divorced from the value of any underlying commodity--in fact, there is no underlying commodity.
For instance, derivatives that are based on a particular commodity are generally settled by the payment by one party to the other and not by the physical delivery of the actual underlying commodity.
It is important to realize that the goal of these funds is to reflect the performance of the underlying commodity, minus any expenses associated with operating the fund.
Larger orders from a broad range of customer industries contributed to this record quarterly order intake, giving evidence of GEAs resilience against adverse underlying commodity prices as for example a still depressed milk price impacting the overall investment mood in particular industries.
ETF tracking errors and technical factors like futures contract rollovers can also affect returns relative to the underlying commodity.
According to the company, the decrease in revenue was principally attributable to the reduced purchasing from companies in the oil and gas industry stemming from budget constraints derived from a drastic decline in the underlying commodity prices year over year.
Commodities are the actual raw materials while 'commodities derivatives' are financial contracts derived from the value of the underlying commodity.
Global business manager for Blooomberg's fixed income, commodities and currencies Tod Van Name said, "It is critical that market participants stay connected to the underlying commodity market fundamentals for a clear and actionable view of what is driving supply and demand.
Around 24 borrowers were given funds by NSEL allegedly in connivance with the exchange's management without any underlying commodity deposited by those borrowers.
NCDEX will continue to focus on commodities that are crucial to the Indian economy as well on increasing the participation of hedgers - those with genuine exposure to the underlying commodity such as producers, processors, industrial consumers, exporters, importers and traders.
About 24 borrowers were given the funds by NSEL without any underlying commodity deposited by them.
Regarding the underlying commodity price, we see that the average price paid by domestic refiners to acquire a barrel of oil is currently $100.