Reference Asset

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Dictionary Says

Definition of 'Reference Asset'

An underlying asset used in credit derivatives, which are then used when there is a risky debt issuer, such as a corporation or municipality. In a credit derivative, the buyer purchases protection against the chance of default by the risky borrower by buying the reference asset.
Investopedia Says

Investopedia explains 'Reference Asset'

When an entity issues debt or borrows money, there is a chance that it will not repay the funds, which is called default risk. The debt holder is always exposed to risk by the borrower defaulting on the debt.

To hedge this risk, the debt holder can enter into a credit derivative, such as a total return or credit default swap. The swap allows the debt holder to transfer the risk they are exposed to to a third party.
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'Reference Asset'

  • The Alphabet Soup Of Credit Derivative Indexes

    http://www.investopedia.com/articles/optioninvestor/07/credit-der-index.asp
    ... To Swaps.) As the name implies, in a single name CDS the underlying asset or reference
    obligation is a bond of one particular issuer or reference entity. ...

  • Choose Your Own Asset Allocation Adventure

    http://www.investopedia.com/articles/stocks/07/allocate_assets.asp
    ... In the equity markets, investors often reference relative valuation metrics, such
    as the ... The calculations can be used to rotate within and across asset classes ...

  • Floating-Rate Mutual Funds: Rewards And Risks

    http://www.investopedia.com/articles/mutualfund/10/floating-rate-mutual-funds.asp
    ... Limited Duration A floating-rate fund's net asset value (NAV) should be less sensitive
    to ... will adjusts every 30-90 days, based on changes in the reference rate ...

  • Which ETF To Choose: Small Cap Vs. Large Cap

    http://stocks.investopedia.com/stock-analysis/2009/Which-ETF-To-Choose-Small-Cap-Vs.-Large-Cap-PZD-SZG-IWP0309.aspx
    ... ETF by Asset Class. ... As a point of reference, investors should note that the
    three-year return for the SPDRS S&P 500 Index (NYSE:SPY), which tracks the S&P 500 ...

  • Derivatives 101

    http://www.investopedia.com/articles/optioninvestor/10/derivatives-101.asp
    ... contracts are contracts between parties to buy or sell an asset in the future for
    a specified price. These contracts are usually written in reference to the ...

  • What is an alienation clause?

    http://www.investopedia.com/ask/answers/08/alienation-clause.asp
    ... Whether used in reference to insurance policies, mortgages or commercial loans,
    an ... inserted into a loan agreement, transfer of a mortgaged asset requires that ...

  • Using Double Tops And Double Bottoms In Currency Trading

    http://www.investopedia.com/articles/forex/05/PriceMemory.asp
    ... Using the red candle as a reference point, enter a limit sell order somewhere in ...
    Figure 5: Once the price of an asset breaks through a support or resistance ...

  • Managing Interest Rate Risk

    http://www.investopedia.com/articles/optioninvestor/08/manage-interest-rate-risk.asp
    ... or a bond, due to the possibility of a change in the asset's value resulting ... fixed
    interest rate and receives a floating interest rate equal to a reference rate ...

  • How Bond Market Pricing Works

    http://www.investopedia.com/articles/bonds/07/pricing_conventions.asp
    ... DM is the spread that, when added to the bond's current reference rate, will ...
    Asset-Backed Securities: ABS frequently trade at a nominal yield spread at their ...

  • Options Trading Strategies: Understanding Position Delta

    http://www.investopedia.com/articles/optioninvestor/03/021403.asp
    ... fact that put options increase in value when the underlying asset price falls. ...
    Advantages.) Position Delta Position delta can be understood by reference to the ...

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