underlying asset

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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 ?
The search for a scapegoat will no doubt continue after the VIX surge last week contributed to the 10-11% correction on underlying stocks, along with the demise of the XIV inverse VIX short-volatility index.
A contract equivalent number will be calculated for each stock option class based on the underlying stocks market capitalisation and liquidity, and other factors.
Options are generally subject to volatile swings in price based on changes in value of underlying instrument, and options written by the Fund may be particularly subject to this risk as the underlying stocks are selected by the Index Provider to have high volatility.
However one of the biggest shortcomings of the said model at that time was the assumption that the underlying stocks do not pay any dividends.
From 5 October, 10 unsponsored level one BDRs -- which are derivatives based on individual underlying stocks -- will be available for trading on BM&F Bovespa.
This study examines impact of the introduction of single stock futures contracts on the return volatility of the SSFs-listed underlying stocks.
Hence, this study is motivated to extract information on the warrant market by documenting and analyzing the impact of warrant listings on the trading behaviour of underlying stocks on Bursa Malaysia.
Weightings of underlying stocks in each segment are adjusted as needed for occasional additions and deletions due to market entry or market departure, stock issuance or repurchases, stock splits, mergers or acquisitions, and changes in status of a company's interactive Best's Rating.
Puts and calls are generally traded at small fractions of the price of their underlying stocks.
Professional investors who engage in sophisticated trading strategies involving the options and futures, and the underlying stocks, often must buy or sell large amounts of those securities to settle up their positions at expiration.
In many cases, convertibles declined in value, while their underlying stocks increased.
As an example, consider the underlying stocks IBM and GM.