Underlying Instrument

Categories: Finance,

An underlying instrument is a security, such as a stock, a commodity, or other type of financial product, such as a stock index, whose value determines the value of a derivative investment or product. For example, if you own a stock option, the stock you have the right to buy or sell according to the terms of that option is the option's underlying instrument. Underlying instruments may also be called underlying products, underlying interest, or sometimes the underlying investment.