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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
In the IRS ruling, an exchange of two television stations was held to qualify for nonrecognition treatment without a discussion on the similarity (or dissimilarity) of the underlying assets of each station.
Outline of Underlying Assets: Medical treatment fees receivable held by J Hospital against Social Insurance Medical Fee Payment Fund (SIMFPF) and the Federation of National Health Insurance Organizations (FNHIOs)
Limited partnerships have been widely used in recent years in estate and gift planning; with applicable valuation discounts, the fair market value (FMV) of partnership interests are less than the FMV of the partnership's underlying assets. May this type of planning also be used to reduce gain recognition in corporate distributions?
* What should the accounting be for financial instruments and transactions that seek to transfer market and credit risk--for example, futures contracts, interest rate swaps, options, forward commitments, nonrecourse arrangements and financial guarantees--and for the underlying assets or liabilities to which the risk-transferring items are related?
Outline of Underlying Assets: Medical treatment fees receivable held by C Hospital against Social Insurance Medical Fee Payment Fund (SIMFPF) and the Federation of National Health Insurance Organizations (FNHIOs)
Rather, the transferor's long-term capital gain recognized on the sale of the interest is characterized by reference to the entity's underlying assets that give rise to the gain.
In addition, there may be a discount on the underlying assets for
311 is measured by valuing the underlying assets (rather than the partnership interests) on the date of the distribution (Pope & Talbot, Inc., 162 F3d 1236 (9th Cir.
Outline of Underlying Assets: Medical treatment fees receivable held by I Hospital against Social Insurance Medical Fee Payment Fund (SIMFPF)
These factors have supported reductions in the FMV of LLC member interests when compared to the underlying assets; see Bernard Mandelbaum, TC Memo 1995-255, aff'd, 91 F3rd 124 (3rd Cir.
Outline of Underlying Assets: Medical treatment fees receivable held by Kurashiki Medical Center against Social Insurance Medical Fee Payment Fund (SIMFPF) and the Federation of National Health Insurance Organizations (FNHIOs)
With respect to the acquisition of a German target company, there are special reorganization provisions that also offer a possible solution for a tax-free step-up of the underlying assets' tax bases.