Investor Glossary-underlyingInvestor Glossary-underlyingInvestor Glossary-underlyingInvestor Glossary-underlyingInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Underlying

The HTML to link to this page
 

The term underlying generally refers to the asset that a derivative contract is written upon. However, it is not required that the underlying be an asset; in fact, an underlying can be a group of assets, an interest rate, a commodity, a share of stock, or even another derivative. In an options exchange, the underlying refers to the security that may be bought or sold at the contract price. Likewise, on a futures exchange, the underlying is the asset that must be bought or sold at the agreed upon price. In this manner, the value of the underlying at execution determines the gains or losses that are realized from possessing the derivative at that point in time. The price of many derivative contracts can then be determined by looking at the current price and implied volatility of the underlying along with the risk free rate, time to maturity, and strike price of the option.



Rate this underlying definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: inflation, stock split, required rate of return, 144a, option premium, VIX, class C shares, implied volatility, diluted share, average price per share, APR, risk management, deferred revenue, LIBOR, limit order, deferred tax, real GDP, ex-dividend, current ratio, annual return, minority interest, 1031 exchange, stock market close, FICO score, labor relations, per diem, retained earnings, quality assurance, ex-dividend date, FTSE, debt service coverage, liquidity ratio, 401a, command economy, dividends payable, Key Rate Duration, Zero Cost Collar, irrevocable trust, balance sheet, reverse mortgage, open position, 1035 exchange, phantom income, covered put, cancelled check, in escrow, EBITDA, wholly-owned subsidiary, margin rate


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Home | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use