What Is Time Value?

Patrick Curtis

Reviewed by

Patrick Curtis WSO Editorial Board

Expertise: Investment Banking | Private Equity

The term Time Value can apply to either money or options.

For money it is simply the idea that money right now is worth more than money in the future. The way to work out the present value of money is to divide the future payment by the prevailing interest rate. For example, if the risk free rate is 3%, $1000 in a years time is worth $970.8 today (1000 / 1.03). This is a key concept in a DCF.

For options, the time value is simply the value of the option that is due to the time left till maturity.

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Patrick Curtis

Patrick Curtis is a member of WSO Editorial Board which helps ensure the accuracy of content across top articles on Wall Street Oasis. He has experience in investment banking at Rothschild and private equity at Tailwind Capital along with an MBA from the Wharton School of Business. He is also the founder and current CEO of Wall Street Oasis. This content was originally created by member WallStreetOasis.com and has evolved with the help of our mentors.