Underlying price. "Underlying price": 1. Options. The current market price of the (underlying) asset which the option holder has the right to require the option writer to deal in (at the strike price specified in the option). 2. In relation to derivative instruments more generally, the current market price of the (underlying) asset to which the derivative.

Underlying price

Price Behavior After Earnings Announcements

Underlying price. (FAS ) - Accounting for Derivative Instruments and Hedging Activities, an underlying is a specified interest rate, security price, commodity price, foreign exchange rate, index of prices or rates, or other variable (including the occurrence or nonoccurrence of a specified event such as a scheduled payment under a.

Underlying price


Underlying, in equities, is the common stock that must be delivered when a warrant is exercised, or when a convertible bond or convertible preferred share is converted to common stock. The price of the underlying is the main factor that determines prices of derivative securities, warrants and convertibles. Thus, a change in an underlying results in a simultaneous change in the price of the derivative asset linked to it.

There are two main types of investments: Debt must be paid back and investors are compensated in the form of interest payments. Equity is not required to be paid back and investors are compensated by share price appreciation or dividends. Both of these investments have specific cash flows and benefits depending on the individual investor.

There are other financial instruments based solely on the movement of debt and equity. There are financial instruments that go up when interest rates go up. There are also financial instruments that go down when stock prices go down. These financial instruments are based on the performance of the underlying asset , or the debt and equity that is the original investment. This class of financial instrument is referred to as derivatives as it derives value from movements in the underlying.

Generally, the underlying is a security such as a stock in the case of options, or a commodity in the case of futures. Two of the most common types of derivatives are referred to as calls and puts. A call derivative contract gives the owner the right, but not the obligation, to buy a particular stock or asset at a given strike price.

A put derivative contract gives the owner the right, but not the obligation, to sell a particular stock at a given strike price. Both the call and the put are dependent on price movements in the underlying asset, which in this case is the stock price of company A.

Dictionary Term Of The Day. Broker Reviews Find the best broker for your trading or investing needs See Reviews. Sophisticated content for financial advisors around investment strategies, industry trends, and advisor education. A celebration of the most influential advisors and their contributions to critical conversations on finance. Become a day trader. What does 'Underlying' mean Underlying, in equities, is the common stock that must be delivered when a warrant is exercised, or when a convertible bond or convertible preferred share is converted to common stock.

Financial Derivatives There are other financial instruments based solely on the movement of debt and equity. An Underlying Example Two of the most common types of derivatives are referred to as calls and puts. Get Free Newsletters Newsletters.


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