Talk:Intrinsic value (finance)

Comments from previous merge proposal with Intrinsic theory of value

The following discussion is closed. Please do not modify it. Subsequent comments should be made in a new section. A summary of the conclusions reached follows.

The result of this discussion was to not merge

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Proposal to merge this article with Intrinsic theory of value

• I disagree with the proposal to merge these pages.

• I also diagree with merging the pages.

• i dissagree also, the two explanations apply to different theories

• I also strongly disagree. These are very different theories/concepts. I work in finance (in derivative products more specifically) and have a bachelor degree in Economics. I am very confident to say that the pages should not be merged. —Preceding unsigned comment added by 76.67.183.193 (talk) 00:12, 21 September 2007 (UTC)

The discussion above is closed. Please do not modify it. Subsequent comments should be made on the appropriate discussion page. No further edits should be made to this discussion.

Option part

hello, when i read this page, I am confused about the option part of it. Specifically speaking the element when it states "floored to 0"? —Preceding unsigned comment added by Cam.dixon (talk • contribs) 01:53, 26 March 2008 (UTC)

Definition

Shouldn't intrinsic value be defined in terms of present value, or some other measure of the time value of money, on this page? There certainly might be a relationship to the Intrinsic theory of value, as the merger proposal suggested, but I don't think all financial market participants who use the term 'intrinsic value' or 'fundamental value' would agree that it's the same thing. --Rinconsoleao (talk) 10:41, 28 July 2008 (UTC)

Also, isn't the word 'intrinsic' vague? Are we defining 'intrinsic value' clearly? --Rinconsoleao (talk) 11:18, 17 February 2009 (UTC)

In options pricing theory (a) the intrinisic value of the option is indeed nil if the option is out of the money and (b) "intrinsic value" is the common technical name for the term, and it means "that part of the total value of the option other than its time value", which is clearly spelled out in the article, and isn't at all vague.

It has been a while since i had to do this in anger, but let's say for example:

• today's market price of an orange is $5.
• I sell you the right to purchase an orange from me for $6 at any time in the next year, regardless of the current market price of the orange. (in other words, you buy a call at $6).
• today, that option is intrinsically worthless, since you could buy the orange elsewhere than you could get it from me under the call.
• But you would still pay for the option, because the price of oranges may go through the roof, and you're guaranteed to be able to buy at $6.
• The amount you pay represents the time value of the option. ElectricRay (talk) 18:15, 26 March 2009 (UTC)

I understand that this discussion has been inactive for over a decade, but no clear and overarching definition for laypeople exists on this page as of writing. There are some *examples* of what Intrinsic Value is, in specific circumstances. There are also some highly-technical descriptions. These are not sufficient to properly explain the concept to people who are not already familiar with economics. FlintTD (talk) 11:00, 21 October 2021 (UTC)

Fundamental value of an option

Fundamental value is usually defined in terms of expected present discounted value of payoffs. So if "intrinsic value" is the same as "fundamental value", then the discussion of the intrinsic value of options is wrong. Even when the value is "out of the money", it will usually have a positive probability of going "in the money" at some time in the future, and therefore its expected present discounted value is positive.

Also, Economic bubble is defined in terms of a deviation from intrinsic value. But an economic bubble is usually defined in terms of deviation from expected present discounted value. So if intrinsic value is not the same thing as expected present discounted value, then the definition of Economic bubble is wrong. --Rinconsoleao (talk) 11:17, 17 February 2009 (UTC)

Adding external link

I would be interested in hearing opinions of Wikipedia users about usefulness of adding this external link to the article: iStoskResearch iStoskResearch provides intrinsic (or fair) value calculations for most actively-traded US and Canadian stocks. Personally, I find it very useful. The model is also highly praised by Value Investing For Dummies and by High-Powered Investing All-In-One For Dummies. —Preceding unsigned comment added by 62.122.208.187 (talk • contribs)

It shouldn't be there per WP:ELNO points 2, 4, 5, and 11. - MrOllie (talk) 13:39, 29 November 2009 (UTC)

Misstatement in Real estate section

Is this part of one particular sentence "...cash flows which are foregone by buying a piece of real estate..." incorrect. Should it read "cash flows which are foregone by selling a piece of real estate"? 173.153.7.137 (talk) 12:06, 26 May 2014 (UTC)