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 ?
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.
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.
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. The past few weeks were noteworthy for the scramble in the US to avert the afiscal cliff' and raise the debt ceiling, strong PMI data from China, and quantitative easing in Japan.
After a strong start to the year which saw UK-listed miners add 8.5%, 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.
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.) Historically, the three underlying indices have exhibited low correlation to each other, enabling the DBLCI Apex Index to generate potentially higher returns in all economic cycles.
ETFs are derivative products, which are traded based on price movements in any of the existing indices or underlying commodities. Therefore, they do not require fund managers as they follow the trends in the underlying index or commodity.
oGMR is a valuable risk-mitigating tool, as it secures financing through the intrinsic value of underlying commodities. The financing of over Dh 1.1 billion in 2009 alone is a demonstration of financiersAE confidence in GMRAEs value proposition in facilitating and expanding trade financing.o
"GMR is a valuable risk-mitigating tool, as it secures financing through the intrinsic value of underlying commodities. The financing of over AED 1.1 billion in 2009 alone is a demonstration of financiers' confidence in GMR's value proposition in facilitating and expanding trade financing."
"GMR is a valuable risk-mitigating tool, as it secures financing through the intrinsic value of underlying commodities. The financing of over Dh1.1 billion in 2009 alone is a demonstration of financiers' confidence in GMR's value proposition in facilitating and expanding trade financing," he remarked.
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. The CMH is effectively an alternative to the LME contracts.
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.
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.