Fair Value


DEFINITION of 'Fair Value'

1. The estimated value of all assets and liabilities of an acquired company used to consolidate the financial statements of both companies.

2. In the futures market, fair value is the equilibrium price for a futures contract. This is equal to the spot price after taking into account compounded interest (and dividends lost because the investor owns the futures contract rather than the physical stocks) over a certain period of time.


Loading the player...


2. The "fair value" quoted on TV refers to the relationship between the futures contract on a market index and the actual value of the index. If the futures are above fair value then traders are betting the market index will go higher, the opposite is true if futures are below fair value.

  1. Acquisition

    A corporate action in which a company buys most, if not all, ...
  2. Perceived Value

    The worth that a product or service has in the mind of the consumer. ...
  3. Consolidate

    The combining of assets, liabilities and other financial items ...
  4. Compounding

    The ability of an asset to generate earnings, which are then ...
  5. Asset

    1. A resource with economic value that an individual, corporation ...
  6. Annual Report

    1. An annual publication that public corporations must provide ...
Related Articles
  1. Fundamental Analysis

    What's Fair Value?

    Fair value has three different meanings depending on the context.
  2. Fundamental Analysis

    Discounted Cash Flow Analysis

    Find out how analysts determine the fair value of a company with this step-by-step tutorial and learn how to evaluate an investment's attractiveness for yourself.
  3. Options & Futures

    How To Avoid Closing Options Below Intrinsic Value

    To get the best return possible on your options trading, it is important to understand how options work and the markets in which they trade.
  4. Investing Basics

    Pin Down Stock Price With Real Options

    How can you assign a value to what a company may do with its business in the future? We explain how it works.
  5. Active Trading Fundamentals

    Efficient Market Hypothesis: Is The Stock Market Efficient?

    Deciding whether it's possible to attain above-average returns requires an understanding of EMH.
  6. Active Trading

    Traders: Profit From Other Investors' Fear

    Learn to pounce on the opportunity that arises when other traders run and hide.
  7. Investing

    Asset Manager Ethics: Acting With Competence and Diligence

    Managers must make investment decisions based on their personal investment process, which in turn should be based on solid research and due diligence.
  8. Forex Education

    Understanding The Income Statement

    Learn how to use revenue and expenses, among other factors, to break down and analyze a company.
  9. Stock Analysis

    If You Had Invested Right After Amgen's IPO

    Discover how $1,000 invested in Amgen during its initial public offering (IPO), without reinvesting dividends, would be worth over $427,000 as of November 2015.
  10. Investing

    Time to Bring Active Back into a Portfolio?

    While stocks have rallied since the economic recovery in 2009, many active portfolio managers have struggled to deliver investor returns in excess.
  1. When is market to market accounting performed?

    Mark to market accounting is used for substantially all investments or financial instruments held on a corporation's balance ... Read Full Answer >>
  2. How is fair value calculated in the futures market?

    The fair value is the theoretical calculation of how a futures stock index contract should be valued considering the current ... Read Full Answer >>
  3. What is the difference between carrying value and fair value?

    Carrying value and fair value are two different accounting measures used to determine the value of a company's assets and ... Read Full Answer >>
  4. What are some examples of inherent risk?

    In financial and managerial accounting, inherent risk is defined as the possibility of incorrect or misleading information ... Read Full Answer >>
  5. Why are the fair value accounting rules controversial?

    The fair value of an asset is the amount for which it can be bought or sold between two agreeing parties. An important factor ... Read Full Answer >>
  6. What is the difference between macroeconomics and finance?

    Economics is a broad category that encompasses both macroeconomics and finance. Macroeconomics refers to behaviors of large ... Read Full Answer >>
  7. How does goodwill amortize?

    Per the Financial Accounting Standards Board (FASB) Statement 142, Accounting for Goodwill and Intangible Assets, goodwill ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Cyber Monday

    An expression used in online retailing to describe the Monday following U.S. Thanksgiving weekend. Cyber Monday is generally ...
  2. Bar Chart

    A style of chart used by some technical analysts, on which, as illustrated below, the top of the vertical line indicates ...
  3. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  4. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  5. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  6. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
Trading Center