time value

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Time value

Applies to derivative products. Portion of an option price that is in excess of the intrinsic value, due to the amount of volatility in the stock; sometime referred to as premium. Time value is positively related to the length of time remaining until expiration.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Time Value

1. See: Option time value.

2. See: Time value of money.

3. See: Extrinsic value.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

time value

The portion of an option premium in excess of the option's intrinsic value. A call option that allows the holder to buy 100 shares of a $25 stock for $20 (the strike price) has an intrinsic value of $500. The time value is $150 if the option trades for $650.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
If the condition is satisfied, it chooses a free entry having the smallest backoff time value in BAT.
After receiving response command with the unique backoff time value, the rt-node is ready to send an rt-frame on CFP.
Let's assume rt- node (#AAAA)'s backoff time value is 1, rt-node (#BBBB)'s backoff time value is 2, and rt- node (#CCCC)'s backoff time value is 3.
When rt-node (#BBBB), whose the backoff time value is 2, wants to quit using the allocated bandwidth, it sends the release request command to its coordinator.
Therefore the premium for a call option with a strike price above the current stock price is comprised entirely of time value.
While determining the intrinsic value is relatively straightforward, it is difficult to determine what the time value, and hence, total value of the option should be.
The value of the option at expiration will be the intrinsic value; the excess value of the underlying security over the strike price (there is no remaining time value, and the option cannot be worth less than zero).
The two components in the Black Scholes formula above are similar, but reflect the theoretical total value of the call option (intrinsic value plus time value).
Table 3 also allows a comparison of three measures of time value; Ward's ratio applied to the pooled model, reported average income, and the M-S model.
The columns labeled Truncated Poisson (b) in Table 4 contain opportunity time value estimates for 167 "local" visitors.
The estimated opportunity time value does not appear to vary proportionately and positively with average income as is commonly assumed in travel cost models where opportunity time cost is based on income.
The estimates of opportunity time value shown in Table 5 provide further evidence on the relationship, or lack thereof, between opportunity time value and average income.