fair price

Definition 1
Futures trading: Price at which the demand for a certain type of futures contract matches the availability of such contracts. In case of index futures, it is based on the spot index, the cost of carrying the underlying asset until the futures contract expires (cost of carry), and the expected dividends. In case of derivatives, the fair price is the price that doesn't allow any opportunity for profitable arbitrage. In case of common stock, it equals the spot price plus the interest costs minus the future value of the expected dividends. There are several formulas for computing the fair price of an option, such as the Black-Scholes Option Pricing Model. also called theoretical futures price.

Definition 2
Economics, Finance, General Business: See fair value.

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