What is it in finance?
The fair price is a financial term commonly used in two different contexts. One is a synonym for real value, theoretically impartial asset valuation that may vary from its current market price. The second meaning of the fair price is that the demand and supply for futures contract are the same.
The fair price or the real value of the asset is an economic concept. Its aim is to provide objective valuation of the asset rather than simply it is the current market price. While the market price is determined only by supply and demand, the fair price takes into account the costs of the individual components of the asset. In the case of a company, this could include land, machinery, stock levels and employees. In terms of real value, more subjective elements may also be, for example, useful is an asset for a particular potential buyer. For example, a fisherman would place a higher value in a shop with easy access to the harbor than the baker would place in the same store.
The most common use of the real value is accountant. In one form of accounting, known as historical costs, companies must indicate their assets on the basis of what they actually paid for them. In the second form, the Mark-to-Market, must indicate value based on what is currently worth it. Although it is often done when looking at current market rates, this can also be done by calculating the real value. Most countries have strict rules on how to calculate this real value.
The fair price can also be used for futures contracts. These are assets that include the right to buy a commodity for a specified price on a future date. The fair price is defined as the price for which the demand for a particular type of futursou ES is fulfilled by those who are available for sale. Theoretically, it will be the prevailing market price at any time, but the market imperfections mean that this is not always the case.
the exact metoDa measuring this type of fair price varies depending on the commodity. In general, any method takes into account the current market rate and the loss of interest that arises by the fact that the money is tied in the commodity. In the case of a contract based on stocks, it also takes into account the payment of dividends that anyone who has been holding shares from now on and the futures contract can accept.