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

Digital Rights Management

... obligatory mechanisms controlling use in ways deemed by copyright holders to be unacceptable. See Professor Edward Felten's freedom-to-tinker Web site for information and ...