underlier

underlier
underlying or underlier
An option or a future is a right or a commitment to buy or sell something at a future date. The underlying is the financial instrument that may or must be bought or sold in each option or futures contract. FAS 133, as amended by FAS 149, defines an underlying to be 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 contract). An underlying may be a price or rate of an asset or liability but not the asset or liability itself. American Banker Glossary

Financial and business terms. 2012.

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  • underlier — n. something that gives support, something that forms a foundation; something that underlies …   English contemporary dictionary

  • underlier — un·der·li·er …   English syllables

  • underlier — pronunc at underlie I+ə(r) noun : something that lies under; specifically : underlying company …   Useful english dictionary

  • Pin risk (options) — Pin risk occurs when the underlier of an option contract settles close to the option s strike value at expiration. In this situation, the underlier is said to have pinned . The risk to the writer (seller) of the option is that they cannot predict …   Wikipedia

  • Volatility arbitrage — (or vol arb) is a type of statistical arbitrage that is implemented by trading a delta neutral portfolio of an option and its underlier. The objective is to take advantage of differences between the implied volatility of the option, and a… …   Wikipedia

  • Straddle — In finance, a straddle is an investment strategy involving the purchase or sale of particular option derivatives that allows the holder to profit based on how much the price of the underlying security moves, regardless of the direction of price… …   Wikipedia

  • Implied volatility — In financial mathematics, the implied volatility of an option contract is the volatility implied by the market price of the option based on an option pricing model. In other words, it is the volatility that, given a particular pricing model,… …   Wikipedia

  • Delta neutral — In finance, delta neutral describes a portfolio of related financial securities, in which the portfolio value remains unchanged due to small changes in the value of the underlying security. Such a portfolio typically contains options and their… …   Wikipedia

  • Volatility smile — In finance, the volatility smile is a long observed pattern in which at the money options tend to have lower implied volatilities than in or out of the money options. The pattern displays different characteristics for different markets and… …   Wikipedia

  • Exercise (options) — The owner of an option contract may exercise it, indicating that the financial transaction specified by the contract is to be enacted immediately between the two parties, and the contract itself is terminated. When exercising a call, the owner of …   Wikipedia

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