Underlying asset
Also called: underlying
The share, index, currency, commodity or other asset whose price a derivative's value depends on.
A futures contract on an index has the index as its underlying; an option on a share has the share. The derivative's value moves with the underlying, usually by a multiple because of leverage.
Learn more in these lessons
- What derivatives areWhat is a derivative, and who wins and loses when people trade them?
- Forwards and futuresHow do futures work, and how much can you gain or lose?
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