In finance, the underlying of a derivative is an asset, basket of assets, index, or even another derivative, such that the cash flows of the (former) derivative depend on the value of this underlying. There must be an independent way to observe this value to avoid conflicts of interest. For example, in a stock option to buy 100 shares of Nokia at EUR 50 in April 2010, the underlying is a Nokia share. In a futures contract to buy EUR 10 million 10 year German Government Bonds, the underlying are… (More on Underlying)