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Finance Dictionary and Glossary of Investment Terms
underlying
Definition 1.
In an option contract, the security or commodity that is delivered when the contract is exercised. In securities, the common stock that is the basis of the company's other types of securities, such as stock options or preferred stock.
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Definition 2.
What supports the security or instrument that parties agree to exchange in a derivative contract.
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Definition 3.
1. In derivatives, the security that must be delivered if the contract is exercised. 2. In equities, the common stock that underlies certain types of securities such as warrants and convertible bonds.
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