Define: Underlying Security

UK Accounting Glossary

Definition: Underlying Security



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Full Definition of Underlying Security


Also called an underlier, an underlying security is the security upon which certain others (a call or put option, a convertible security, a stock option, a warrant, or stock right) are based. The underlying security must be delivered once the option, convertible, etc. is exercised. Futures and index options are exceptions to this rule, as they do not have an underlying security behind them. Instead, they are settled in cash. For convertibles, the underlying security is in the form of common stock. When a bond or a preferred stock is converted to common stock, the underlying security is delivered to the new owner. Stock options, warrants, and stock rights also have an underlying security in the form of common stock.


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Underlying Security. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/underlying-security/ (accessed: March 29, 2020).
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Underlying Security. PayrollHeaven.com. Retrieved March 29, 2020, from PayrollHeaven.com website: https://payrollheaven.com/define/underlying-security/

Definition Sources


Definitions for Underlying Security are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 5th February 2020.