# How is "fair value" before the stock market opens calculated?

**URL:** <https://boards.straightdope.com/t/how-is-fair-value-before-the-stock-market-opens-calculated/184751>\
**Category:** Factual Questions\
**Created:** [June 27, 2003, 1:55pm UTC](https://boards.straightdope.com/t/how-is-fair-value-before-the-stock-market-opens-calculated/184751 "2003-06-27T13:55:44Z")\
**Posts on this page:** 2\
**Page:** 1

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**Author:** ![cards](https://avatars.discourse-cdn.com/v4/letter/c/ecd19e/32.png) [@cards](https://boards.straightdope.com/u/cards)\
**Post date:** [June 27, 2003, 1:55pm UTC](https://boards.straightdope.com/t/how-is-fair-value-before-the-stock-market-opens-calculated/184751/1 "2003-06-27T13:55:44Z")

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On the morning business show, Squawk Box, they run a stat showing the market futures and then they calculate “fair value”. What is that calculation?

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**Author:** ![chukhung](https://avatars.discourse-cdn.com/v4/letter/c/e79b87/32.png) [@chukhung](https://boards.straightdope.com/u/chukhung)\
**Post date:** [June 27, 2003, 3:01pm UTC](https://boards.straightdope.com/t/how-is-fair-value-before-the-stock-market-opens-calculated/184751/2 "2003-06-27T15:01:21Z")

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This link, [http://www.allstocks.com/html/fair\_value\_s\_p\_futures\_or\_prem.html](http://www.allstocks.com/html/fair_value_s_p_futures_or_prem.html) has a discussion of “fair value” and the formula used.

> [@](#):
>
> “Fair value” refers to the “proper” relationship between the futures and the cash. Through a complex formula using current short term interest rates and the amount of time left until the futures contract expires, one can determine what the spread between the futures and the cash “should” be. The actual formula for determining fair value is reproduced at the end of this paper.