Underlying security

Underlying security

For options, the security that is subject to purchase or sold upon exercise of an option contract. For example, IBM stock is the underlying security for IBM options. For Depository receipts, the class, series, and number of the foreign shares represented by the depository receipt.

Underlying Security

In a derivative or warrant, a security 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 security is the stock in Johnson and Johnson. An underlying security may be a stock or a bond.
References in periodicals archive ?
Turbo warrants offer investors leverage which reflects the price movements in the underlying security largely independent of the influence of volatility.
The price of a call option rises with the rise in the price of its underlying security.
Price or value of underlying security: The price of a call option increases with the rise in the price of its underlying security.
The ED proposes that, in valuing financial instruments, practitioners consider the effects of contract interest rate differences from current replacement rates and contractual cash flow versus the redemption value of the underlying security.