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"It comes from the underlying assets that are illiquid".
A currency represents a claim on a country's underlying assets.
Holders of the tracking stock share in the earnings of Hughes without owning the underlying assets.
Neither party actually needs to hold the underlying assets, as long as the payments are made.
Derivatives are financial contracts whose value is based on underlying assets.
Market participants often view derivatives and the "underlying" assets they reference almost interchangeably.
Options are designed to hedge against risks to their underlying assets such as stocks.
These products added to the cash crunch, because they often matured before the underlying assets did.
One attraction, he points out, is that derivatives are typically more liquid than their underlying assets.
By shorting C.D.O.'s, Goldman also distorted the pricing of the underlying assets.
(Their name comes from the fact that their value "derives" from underlying assets like stocks, bonds and commodities).
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