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 concept could catch on in the Middle East if Sharia scholars give approval, with the quality of the issuer and the underlying assets being key for buyers, according to Asian Finance Bank Bhd.
Under the transaction, HSBC is selling its corporate and individual pensions policies and an associated annuities book, it said, adding that the underlying assets under management which are part of the deal had a value of some GBP4.
the ABS s underlying assets must consist of a homogeneous pool, so that loan-level data can be reported in a single template that matches the underlying assets.
Summary: Tamweel on Wednesday announced that the ratings of the asset-backed securities of its landmark 2007 securitisation (Tamweel Residential ABS CI (1) Ltd) have been upgraded by Fitch Ratings, reflecting the substantial level of credit enhancement available to the notes and the stable performance of the underlying assets.
All over the world underlying assets for which option contracts are offered include single stocks, commodities and renowned market indices.
A callable bull/bear contract is a derivative that provides investors with a leveraged investment in underlying assets, which can be a single stock or an index.
All underlying assets are generated by commercial transactions.
Further, because the underlying assets are already fully marketable, the potential buyer does not assume additional burdens if he or she decides to sell them.
It determined that an IRA could not be discounted; rather, the underlying assets in the account must be valued on the date of the decedent's death.
The standard of valuation is then not what a hypothetical buyer would pay for the underlying assets on the open market, but what he would pay for the partnership units knowing all the restrictions and limitations set forth in the agreement.
company, $20 is attributable to the underlying assets and $30 is treated as goodwill.
By contrast, many financial derivatives are much more difficult if not impossible to manipulate, even when traded on exchanges, because they are settled in cash or, in any event, are based on underlying assets whose supply is highly price elastic.