Underlying Asset
Definition
What is Underlying Asset?
The asset, rate, index, or reference on which a derivativeA contract whose value depends on an underlying asset, rate, index, or event.'s value is based.
Example in practice
How This Looks in Practice
Crude oilUnrefined petroleum traded in physical and derivatives markets. is the underlying asset for an oil futures contractA standardised exchange-traded agreement to buy or sell an underlying asset at a future date..
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Related Terms
Derivative
A contract whose value depends on an underlying asset, rate, index, or event.
DerivativesNotional Amount
The reference amount used to calculate derivative payments, which may exceed the cash initially exchanged.
DerivativesFutures Contract
A standardised exchange-traded agreement to buy or sell an underlying asset at a future date.
Derivatives StrategiesCovered Call
A strategy that owns the underlying asset and sells call options against it.