In the Context of Derivatives, What Is the 'Underlying Asset'? ▴ Learn

In the Context of Derivatives, What Is the ‘Underlying Asset’?

The underlying asset is the specific financial instrument, commodity, index, or cryptocurrency from which the derivative contract derives its value. For a Bitcoin perpetual future, the underlying asset is Bitcoin (BTC).

The contract itself is a promise to transact based on the price of this asset, but the asset is not necessarily exchanged. The price movement of the underlying asset directly determines the profit or loss of the derivative contract.

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