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.
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References in periodicals archive ?
First, we are a central marketplace where buyers and sellers come together to trade, often in contracts of underlying commodities, under set rules and regulations.
Nurturing the agro- commodities market
It said that banks' ability to trade in the underlying commodities and not just derivatives was significant, as it ensured the smooth functioning of the markets.
-Lobby presents case on bank role in commodity market
The year started on a high note with most sector stocks enjoying further gains following their pre-Christmas rally and shares generally performing better than the underlying commodities.
ATON - Metals Quarterly - 1Q13 - Jan 25, 2013
5%, analysts are starting to question whether much higher share prices are justified given the prospects of higher costs and an uncertain outlook for the underlying commodities.
FTSE falls for 3rd day; charts gloomier
The DBLCI Apex Index aims to generate superior results in all economic cycles by investing in a risk-weighted basket of three underlying commodities indices (DBLCI Mean Reversion Enhanced Index, the DB Commodity Harvest Index and the DBLCI Momentum Index.
DIB launches three-year Islamic Certificate
With so many of the key underlying commodities experiencing price inflation, manufacturers will be increasingly concerned that they will have to pass those costs down the supply chain to retail customers, and ultimately, consumers.
Detergent ingredients soar-threatening retail prices: detergent brands have been relying on consumer loyalty and large ad spends, says Mintec's Robert Miles. But cost increases are threatening their dominance
ETFs are derivative products, which are traded based on price movements in any of the existing indices or underlying commodities.
Gold funds glow on Akshaya Tritiya like never before
GMR is a valuable risk-mitigating tool, as it secures financing through the intrinsic value of underlying commodities.
DMCC's Global Multi Commodity Receipt enables financing of over AED 1.1 billion in 2009
Hitherto, most of the commodity Murabaha deals have been done through brokers in London using contracts on the London Metals Exchange as the underlying commodities.
CMH set for palm oil Murabaha launch
In addition to being capital-protected, Alternative Energy is a five-year fund giving investors the opportunity to benefit from the high performance of the underlying commodities, with a potential gain of 14pc annually, and without any risk to their initial capital.
Capivest energy fund a success
Participants in exchange trading include exchange members (who trade for their own accounts and execute customer orders), financial institutions, businesses that deal in the underlying commodities, commodity pools (the futures equivalent of mutual funds), and individual investors.
Primer on energy derivatives and their regulation
Investment under commodities indexes has ballooned from around EUR70 billion at the start of 2006 to EUR235 billion in mid-April, about EUR90 billion of which has come from fresh financial flows with the rest coming from gains in the underlying commodities, according to Lehman Brothers.
Oil speculators may get burned; ECONOMICS

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