Fair Value

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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.

BREAKING DOWN '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.

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