Meaning & use
extrinsic value
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Meanings
noununcountable
Worth that something has because of outside circumstances, such as demand, usefulness or opinion, and not because of its own nature.
Grammar: Usually uncountable: it has extrinsic value, not an extrinsic value.
Patterns
- have extrinsic value
- the extrinsic value of something
A paper banknote has little worth in itself, so its worth is purely extrinsic value.
The extrinsic value of an old stamp depends on how many collectors want it.
Money has extrinsic value because people agree to accept it.
noununcountablefinance
In options trading, the part of an option's price that is more than its immediate worth and reflects time left and expected price swings.
Grammar: Finance term: the option's extrinsic value falls as expiry approaches.
Patterns
- the extrinsic value of an option
Most of the option's price was extrinsic value because it still had three months to run.
Extrinsic value shrinks to zero when the option expires.
Traders sometimes sell options to collect extrinsic value.
Common combinations
- have extrinsic value
- A signature has extrinsic value only because fans care about it.
- extrinsic value of an option
- The extrinsic value of an option depends on time and volatility.
- purely extrinsic value
- The medal had purely extrinsic value to the family, being a gift from a friend.
- intrinsic and extrinsic value
- Teachers talk about the intrinsic and extrinsic value of learning.
- extrinsic value decay
- Extrinsic value decay speeds up in the final weeks.
Synonyms and how they differ
- external worth
- External worth is a plain-language phrase, while extrinsic value is the standard term in philosophy and finance.
- instrumental value
- Instrumental value is worth as a means to something else, which is one type of extrinsic value, though extrinsic value is broader.
- time value
- Time value is the usual options-market word for the second meaning, and it has no everyday sense.
Opposites
Word family
Commonly confused: extrinsic value or intrinsic value?
extrinsic value vs intrinsic value
Intrinsic value is worth that belongs to a thing itself, and extrinsic value is worth that comes from outside factors such as demand or a link with something else.
Practice
A gold coin has worth because of the metal it contains, but a rare collector's card gets its worth from what buyers will pay, which is its ______.
Choose one answer.
Extrinsic value comes from outside factors like demand. Intrinsic value is the worth in the object itself, as with the gold in a coin.
Make it your own
Write a sentence using “extrinsic value”, then check it and compare it with the examples above.