ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Stocks, bonds, commodities (such as gold, oil, or cotton), interest rates, market indexes, and currencies are underlying assets that influenced the creation of many financial derivatives.

Detailed explanation-2: -Underlying Asset Definition. Derivatives are contracts, which convey the right/obligation to buy or sell a specified asset at a specified price at a specified future date. An underlying asset (or also called Commodity) of the derivative contract is the one that is to be bought or sold on a future date.

Detailed explanation-3: -An underlying asset can be a stock, commodity, index, currency or even another derivative (E.g. volatility index, VIX) product. Some exotic derivatives, like weather derivatives, may even have a non-financial entity as their underlying asset.

Detailed explanation-4: -In commodity derivatives, the underlying asset is a commodity, such as cotton, gold, copper, wheat, or spices. Commodity derivatives were originally designed to protect farmers from the risk of under-or overproduction of crops.

Detailed explanation-5: -An underlying asset is an asset that influences the performance or value of a derivative security. They include stocks, bonds, interest rates, and currencies. An underlying asset is an asset that influences the performance or value of a derivative security. They include stocks, bonds, interest rates, and currencies.