Relative value

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Relative value is the price of an investment product relative to the price of another closely related comparable investment product.

For example, looking at the relative value opportunity (for an investor) of two issuers in the same sector, based on models and analyses, they may appear to be fully comparable, but one is priced lower than the other.

All other things being equal, the lower priced issuer will therefore have a better relative value - and be more attractive - from the perspective of a potential investor.

If a relative price increases, it shows that demand exceeds supply, whereas if a relative price decreases, it indicates the opposite.

See also