Fair Value
Fair value is the mutually agreeable price for a stock, product, or service, ensuring neither buyer nor seller loses, creating a win-win scenario under normal conditions. For example, Mr. A buys Mr. B’s shares at Rs. 1000, valuing them at Rs. 1200, while Mr. B is satisfied selling at Rs. 1000. The deal works for both. The formula for fair value is: Fair Value = Cash * {1 + r (x / 360)} - D, where Cash is the current value, r is the interest rate, x is days to expiry, and D is dividends. In futures, fair value aligns spot and contract prices, though market volatility causes fluctuations.
Related Terms
Authorized Capital
Authorized capital, or authorized share capital, represents the maximum value of shares a company can...
Equity Market
The equity market is where shares are traded, capital is raised, and stocks are offered,...
Free Float Market Capitalization
Free-float market capitalization (FFM) is a valuation method that calculates a company's market value using...
Follow On Public Offer
A Follow-On Public Offer (FPO) enables a publicly traded company to issue additional shares to...
Exponential Moving Average
Exponential Moving Average (EMA) is a technical indicator used in trading to follow price trends...
Assets
An asset is anything that holds economic value and is owned by an individual, company,...
