Underlying instrument

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Underlying Instrument

A security, commodity, or other asset described in a derivative contact. For example, in an option contract giving the holder the right to buy so many shares of AT&T, the underlying instrument is stock in AT&T. Likewise, in a futures contract on so many barrels of refined oil, the underlying instrument is refined oil.

Underlying instrument.

An underlying instrument is a security, such as a stock, a commodity, or other type of financial product, such as a stock index, whose value determines the value of a derivative investment or product.

For example, if you own a stock option, the stock you have the right to buy or sell according to the terms of that option is the option's underlying instrument.

Underlying instruments may also be called underlying products, underlying interest, or sometimes the underlying investment.

References in periodicals archive ?
This tranche enabled sophisticated investors who had a bullish view to participate in the upside of their selected counters, with a wide array of underlying companies with exposure to the O&G sector, said the bank.
In our view, given that over 90% of EOS's holdings are quoted on the RTS and MICEX, combined with its shares' superior liquidity relative to the underlying companies, the discount to NAV seems unjustified.
A DB plan removes the necessity of employees to understand that their pensions come from the success of their investments--the mutual funds and the underlying companies invested them.
Our economy continues to boom ahead, and the value of the underlying companies should follow.
It cannot be assumed that underlying companies will always pay dividends immediately before the shareholding company makes a distribution.
We don't want to buy securities whose P/Es are not in line with historic norms or are too far ahead of the earnings growth rates that the underlying companies can deliver.