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


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Investor Glossary | 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