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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Basics of Derivatives

In a derivatives contract, the asset or variable from which the contract derives its value is known as the:

The underlying is the asset, index, rate or variable from which a derivative contract derives its value. Strike price, lot size and premium are features of the contract itself, not the source of its value.

  1. AUnderlyingCorrect
  2. BStrike
  3. CLot
  4. DPremium

Explanation

A derivative has no standalone value; its price depends on another asset, index or rate, called the underlying. Strike price, lot size and premium are contract terms, not the source of value.

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