Encyclopedia > Underlying instrument

Article Content

Underlying instrument

The underlying instrument is the financial instrument upon which a derivative security's price is based.

In the financial world, it is possible to trade in one financial instrument whose value is defined in terms of the price of some other financial instrument (the 'underlying' instrument).

Stock options are a common example.

All Wikipedia text is available under the terms of the GNU Free Documentation License

Search Encyclopedia

Search over one million articles, find something about almost anything!

Featured Article

Dynabee

... simple. It can easily be understood with a little knowledge of gyroscopes. Their striking property is that the axis of a spinning gyroscope will resist a force applied to ...