What Does Intrinsic Value Mean?The actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business, in terms of both tangible and intangible factors. This value may or may not be the same as the current market value. Value investors use a variety of analytical techniques in order to estimate the intrinsic value of securities in hopes of finding investments where the true value of the investment exceeds its current market value.
What Does Extrinsic Value Mean?
The difference between an option's price and the intrinsic value.
The difference between an option's price and the intrinsic value.
Investopedia explains Extrinsic ValueFor example, an option that has a premium price of $10 and an intrinsic value of $5 would have an extrinsic value of $5. Denoting the amount by which the option's price is greater than the intrinsic value, the extrinsic value of the option declines as its expiration date draws closer.
References
Extrinsic value definition Retrieved 11/5/2010, 2010, from http://www.investopedia.com/terms/e/extrinsicvalue.asp
Intrinsic value definition Retrieved 11/5/2010, 2010, from http://www.investopedia.com/terms/i/intrinsicvalue.asp
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