Price and value

CFA Level II Derivatives
#1

Hi,

I posted the following message in an old thread but I do not see it appear on the main page so I post it again but as a new topic:

I do agree with the definition of S2000magician (price is what you pay for and value is what you should pay for) but how is it that the difference between price and value can be so huge then. For example, a forward contract on a bond can be priced 1000 and valued 20.

Thanks.

#2

That great a disparity is unlikely.

Bear in mind that value can be subjective, whereas price is not.

#3

Thank you

#4

In the same vein and relevant to Level II curriculum, price is determined based on no-arbitrage principle.