Derivatives · glossary
The number a derivative's payments are worked out from, which neither party controls. Here it is three-month EURIBOR, the loan's own rate, which is why the hedge works. Definition: Underlying · Chapter 1
Explained in Chapter 1, What a Derivative Is, of Derivatives.
Every derivative is built from two figures. The underlying is the number neither party controls, which here is 3-month EURIBOR, the loan's own rate. The notional is the amount that number is applied to. On agreed dates the parties pay each other sums worked out from the two.Read Chapter 1, What a Derivative Is →
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in relation to a Transaction, the rate, price or index from which its payments are worked out and which neither party controls; for the Transactions the parties contemplate at the date of this Agreement it is 3-month EURIBOR, as the Rate Definitions Annex describes it;Read the definition in the document →
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This term is part of one complete fictional deal, with every document attached and a test after every chapter. Open Derivatives → · All terms A–Z →