Underlying Asset [Banks & Banking] Law and Legal Definition

According to 12 CFR 220.2 [Title 12 -- Banks and Banking; Chapter II -- Federal Reserve System; Subchapter A -- Board of Governors of the Federal Reserve System; Part 220 -- Credit by Brokers and Dealers (Regulation T)], underlying asset means:

“(1) The security or other asset that will be delivered upon exercise of an option; or

(2) In the case of a cash-settled option, the securities or other assets which comprise the index or other measure from which the option's value is derived.”