Derivatives

Underlying Asset

The real asset (a stock or index) whose price a derivative contract's value is based on.

The underlying asset is the real, independently existing asset — typically a stock (like Reliance Industries) or an index (like Nifty 50) in the Indian F&O market — that a derivative contract’s value is based on. Without an underlying asset, a derivative has no basis for its value.

See how underlying assets relate to Futures and Options in What Are Derivatives? Futures and Options Explained Simply.