Fair Value

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What is the 'Fair Value'

The fair value is 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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RELATED FAQS
  1. How is fair value calculated in the futures market?

    Learn how the fair value for futures stock index contracts is calculated, and understand how differences between those numbers ... Read Answer >>
  2. What is the difference between carrying value and fair value?

    Learn about the carrying value and fair value of assets and liabilities, what the carrying and fair value measure and the ... Read Answer >>
  3. Why are the fair value accounting rules controversial?

    Find out about the controversial points to fair value trading, ranging from historical concerns to more modern issues in ... Read Answer >>
  4. How can I calculate the notional value of a futures contract?

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  5. What do the S&P, Dow and Nasdaq futures contracts represent?

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  6. Why do futures' prices converge upon spot prices during the delivery month?

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