Fair value is a tool used by investors to understand the relationship between the value of futures contracts and the current price of a stock. The term is used in pre-market hours to help forecast the direction of the market.

Any differences are used by sophisticated investors to create arbitrage opportunities. What is fair value and how is it interpreted by investors? Salman Khan of the Khan Academy gives a detailed explanation in the videos below.

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How The Price Of Stock Futures Is Calculated | Investopedia

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How Dow Jones Futures Fair Value Is Calculated? | eHow

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