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Which of the following statements is true? The underlying security is: the security to which the...

Which of the following statements is true? The underlying security is:

the security to which the event terms will be applied only for a re-organization event

the security that will be distributed as a result of a benefit

may be the same as the entitlement security

none of the above

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Answer #1

3rd option is correct in context of Underlying Security. The underlying asset may be the same as entitlement security.

Underlying security may be any stock, Index or bond on which the derivative instruments are based. The derivative instruments (futures, options) derive it's value from its underlying security.

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