Underlying
Underlying is a financial term used to describe an asset, index, or security that serves as the basis for a derivative or other financial instrument. It is the asset or security that the derivative or other financial instrument is based on. The value of the derivative or other financial instrument is derived from the underlying asset or security. Examples of underlying assets or securities include stocks, bonds, commodities, currencies, and indices.
History of the Term
The term underlying has been used in the financial industry since the early 20th century. It was first used to describe the asset or security that a derivative or other financial instrument was based on. The term has since been used to describe the asset or security that serves as the basis for a derivative or other financial instrument.
Comparisons
| Underlying | Derivative |
|---|---|
| Asset or security | Financial instrument |
| Stocks, bonds, commodities, currencies, indices | Options, futures, swaps, forwards |
Summary
Underlying is a financial term used to describe an asset, index, or security that serves as the basis for a derivative or other financial instrument. It is the asset or security that the derivative or other financial instrument is based on. Examples of underlying assets or securities include stocks, bonds, commodities, currencies, and indices. For more information about this term, you can visit websites such as Investopedia, The Balance, and Investing.com.
See Also
- Derivative
- Options
- Futures
- Swaps
- Forwards
- Stocks
- Bonds
- Commodities
- Currencies
- Indices
