underlying (See underlie)
Dictionary Definition
Verb
1 be or form the base for
1 in the nature of something though not readily
apparent; "shortcomings inherent in our approach"; "an underlying
meaning" [syn: implicit
in(p), inherent]
2 located beneath or below
3 being or involving basic facts or principles;
"the fundamental laws of the universe"; "a fundamental
incompatibility between them"; "these rudimentary truths";
"underlying principles" [syn: fundamental, rudimentary]
User Contributed Dictionary
English
Adjective
- lying underneath
- We dug down to the underlying rock.
- basic or fundamental
- Points and straight lines are underlying elements of geometry.
- implicit
- Many nursery rhymes have an underlying meaning.
Translations
basic or fundamental
implicit
Extensive Definition
In finance, the underlying of a derivative
is an asset, basket of
assets, index,
or even another derivative, such that the cash flows of the
(former) derivative depend on the value of this underlying. There
must be an independent way to observe this value to avoid conflicts
of interest.
For example, in a stock option
to buy 100 shares of Nokia at EUR 50 in
September 2006, the underlying is a Nokia share. In a futures
contract to buy EUR 10 million 10 year German Government Bonds,
the underlying are the German Government bonds. Other examples are
stock
market indexes such as the
Dow Jones Industrial Average and Nikkei
225.
Fixed-income derivatives are an example of
derivatives whose underlying is also a derivative. For example,
Euro-Bund options (OGBL) are traded on Eurex and their
underlying is the Euro-Bund futures contract (FGBL).
underlying in German: Basiswert
underlying in Italian: Strumento
sottostante
underlying in French: Actif_sous-jacent
underlying in Russian: Базовый актив
Synonyms, Antonyms and Related Words
ab ovo, basal, basic, basilar, between the lines,
bottom, cardinal, constituent, constitutive, covert, critical, crucial, cryptic, delitescent, dormant, elemental, elementary, esoteric, essential, foundational, fundamental, gut, hibernating, hidden, indispensable, latent, lurking, material, muffled, mystic, necessary, needful, obfuscated, obscured, occult, of the essence, original, possible, potential, primal, primary, primitive, radical, rudimentary, sleeping, submerged, substantial, substantive, under the
surface, unmanifested, veiled, virtual, vital