Fair Value

AAA

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.

INVESTOPEDIA EXPLAINS 'Fair Value'

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.

RELATED TERMS
  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. Annual Report

    1. An annual publication that public corporations must provide ...
  4. Compounding

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

    The combining of assets, liabilities and other financial items ...
  6. Asset

    1. A resource with economic value that an individual, corporation ...
Related Articles
  1. 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.
  2. thinkstock|istock
    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.
  3. 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.
  4. 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.
  5. Active Trading

    Traders: Profit From Other Investors' Fear

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

    When do companies publish P&L statements?

    Understand what a company's P&L statement represents, and find out when companies traditionally publish these statements.
  7. Fundamental Analysis

    What is the difference between operating income and revenue?

    Understand the definitions of revenue and operating income, how they are calculated and interpreted, and how operating income is derived from revenue.
  8. Fundamental Analysis

    What is the difference between gross margin and gross profit?

    Understand the difference in definitions between gross margin and gross profit, and learn what each represents as a metric of a company's profitability.
  9. Fundamental Analysis

    What is the difference between market capitalization and enterprise value?

    Understand the basics of market capitalization and enterprise value, how they measure company value and how they differ in calculation and precision.
  10. Fundamental Analysis

    What is the difference between operating income and EBITDA?

    Read about the major differences between earnings before interest, taxes, depreciation and amortization (EBITDA) and operating income in a company's financial health.

You May Also Like

Hot Definitions
  1. Marketable Security

    Any equity or debt instrument that it readily salable and can be converted into cash, or exchanged with ease. Stocks, bonds, ...
  2. Risk-Free Rate Of Return

    The theoretical rate of return of an investment with zero risk. The risk-free rate represents the interest an investor would ...
  3. Scarcity

    The basic economic problem that arises because people have unlimited wants but resources are limited. Because of scarcity, ...
  4. Trust Fund

    A trust fund is a fund comprised of a variety of assets intended to provide benefits to an individual or organization. The ...
  5. Christmas Tree

    An options trading strategy that is generally achieved by purchasing one call option and selling two other call options at ...
  6. Christmas Club

    A short-term savings account that usually pays out the full account balance to its account holders once each year, right ...
Trading Center