Underlying asset意思

"Underlying asset" is a term commonly used in finance and investing, particularly in the context of derivatives such as futures, options, and swaps. A derivative is a financial instrument whose value is based on, or "derived" from, the value of one or more underlying assets.

The underlying asset is the asset that the derivative is based on, and its price movements will affect the value of the derivative. The underlying asset can be any type of asset, including:

  1. Stocks: Shares of a company, such as Apple Inc. (AAPL).
  2. Bonds: Debt securities issued by governments or corporations.
  3. Currencies: Foreign exchange derivatives are based on currency pairs, like EUR/USD.
  4. Commodities: Physical goods such as gold, oil, or agricultural products.
  5. Real Estate: Derivatives can be based on the value of real estate, such as through real estate investment trusts (REITs).
  6. Interest Rates: Derivatives can be based on interest rate indexes, such as LIBOR.
  7. Market Indices: Derivatives can be based on stock market indices like the S&P 500 or the Dow Jones Industrial Average.

Derivatives allow investors to speculate on or hedge against the price movements of the underlying asset without actually owning the asset itself. For example, an investor who believes that the price of gold is going to rise might buy a gold futures contract, which is a derivative that obligates the buyer to purchase gold at a future date at a price agreed upon today. The value of the gold futures contract is derived from the price of gold, which is the underlying asset.

Underlying assets can also be other derivatives, creating a complex structure of derivatives based on various underlying assets. Understanding the underlying asset is crucial for investors and traders to assess the risk and potential return of a derivative and to manage their investments effectively.