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 ?
From PNC CPI history, the gold rings appear not as volatile as the underlying commodity.
While day-ahead power prices perked up in September, forward curve contracts illustrated just how weak underlying commodity markets have become, said Andreas Franke, Platts managing editor of European power.
The methodology has been found over the years to be open to abuse and manipulation, particularly since the growth of derivatives for example, futures, options and swaps which can be traded profitably by those in a position to manipulate the underlying commodity s price.
Commodities are the actual raw materials while 'commodities derivatives' are financial contracts derived from the value of the underlying commodity.
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.
We use a murabaha structure with the underlying commodity serving as collateral.
The smaller size of the contract enables participants to construct precisely tailored hedges on the Indian Rupee for any underlying commodity.
It gives you direct exposure to the performance of the underlying commodity, unlike Murabaha where exposure is given in an indirect manner.
According to the taxpayer, the underlying commodity is electricity.
A gap of this magnitude has not been seen for many years but as this relationship normalises to historical averages there should be greater upside for gold equities as they catch up to the underlying commodity.