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I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. What is Extrinsic Value? Key Takeaways Extrinsic value is the difference between the market price of an option, also knowns as its premium, and its intrinsic price, which is the difference between an option's strike price and the underlying asset's price. Extrinsic value rises with increase in volatility in the market.
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By: Tim Plaehn. More Articles 1. Option Basics An option contract gives the buyer the right to buy or sell an underlying security -- typically stock or exchange traded fund, or ETF, shares -- at a specific price.
Option Moneyness Because options on a specific stock are available with a range of strike prices, the "moneyness" of an option has a direct effect on the value of a specific option.
Imagine that an evil demon wants you to value him for his own sake and threatens to cause you severe suffering unless you do. Some have been persuaded that the challenge succeeds, while others have sought to undermine it. One final cautionary note. Nonetheless, it becomes clear on further inspection that Kant is in fact discussing a concept quite different from that with which this article is concerned.
Such talk indicates that Kant believes that the sort of value that he ascribes to rational beings is one that they possess to an infinite degree. But then, if this were understood as a thesis about intrinsic value as we have been understanding this concept, the implication would seem to be that, since it contains rational beings, ours is the best of all possible worlds. It seems best to understand Kant, and other philosophers who have since written in the same vein cf.
Bradley In the history of philosophy, relatively few seem to have entertained doubts about the concept of intrinsic value. Much of the debate about intrinsic value has tended to be about what things actually do have such value.
However, once questions about the concept itself were raised, doubts about its metaphysical implications, its moral significance, and even its very coherence began to appear. Consider, first, the metaphysics underlying ascriptions of intrinsic value. It seems safe to say that, before the twentieth century, most moral philosophers presupposed that the intrinsic goodness of something is a genuine property of that thing, one that is no less real than the properties of being pleasant, of satisfying a need, or whatever in virtue of which the thing in question is good.
Several dissented from this view, however. See Hobbes , Hume Ayer [—] and Charles L. Stevenson [—] see Ayer , Stevenson Other philosophers have since embraced other forms of noncognitivism. But this seems to be a mistake. We should distinguish questions about value from questions about evaluation. Questions about value fall into two main groups, conceptual of the sort discussed in the last section and substantive of the sort discussed in the first section.
Questions about evaluation have to do with what precisely is going on when we ascribe value to something. Cognitivists claim that our ascriptions of value constitute statements that are either true or false; noncognitivists deny this.
But even noncognitivists must recognize that our ascriptions of value fall into two fundamental classes—ascriptions of intrinsic value and ascriptions of extrinsic value—and so they too must concern themselves with the very same conceptual and substantive questions about value as cognitivists address.
It may be that noncognitivism dictates or rules out certain answers to these questions that cognitivism does not, but that is of course quite a different matter from rejecting the very idea of intrinsic value on metaphysical grounds. According to the pragmatist, the world is constantly changing in such a way that the solution to one problem becomes the source of another, what is an end in one context is a means in another, and thus it is a mistake to seek or offer a timeless list of intrinsic goods and evils, of ends to be achieved or avoided for their own sakes.
This theme has been elaborated by Monroe Beardsley, who attacks the very notion of intrinsic value Beardsley ; cf. Conee Denying that the existence of something with extrinsic value presupposes the existence of something else with intrinsic value, Beardsley argues that all value is extrinsic. Far from repudiating the notion of intrinsic value, though, this admission would confirm its legitimacy. But Beardsley would insist that this quick response misses the point of his attack, and that it really is the case, not just that whatever has value has extrinsic value, but also that nothing has intrinsic value.
But here Beardsley seems to be overreaching. Even if it were the case that we cannot know whether something has intrinsic value, this of course leaves open the question whether anything does have such value. And even if it could somehow be shown that nothing does have such value, this would still leave open the question whether something could have such value. As has been noted, some philosophers do indeed doubt the legitimacy, the very coherence, of the concept of intrinsic value.
Before we turn to a discussion of this issue, however, let us for the moment presume that the concept is coherent and address a different sort of doubt: the doubt that the concept has any great moral significance. Recall the suggestion, mentioned in the last section, that discussions of intrinsic value may have been compromised by a failure to distinguish certain concepts.
An example of a nonrelational property is the property of being round; an example of a relational property is the property of being loved. As an illustration of final value, Korsgaard suggests that gorgeously enameled frying pans are, in virtue of the role they play in our lives, good for their own sakes.
In like fashion, Beardsley wonders whether a rare stamp may be good for its own sake Beardsley ; Shelly Kagan says that the pen that Abraham Lincoln used to sign the Emancipation Proclamation may well be good for its own sake Kagan ; and others have offered similar examples cf. Notice that in each case the value being attributed to the object in question is allegedly had in virtue of some extrinsic property of the object.
There is an important corollary to drawing a distinction between intrinsic value and final value and between extrinsic value and nonfinal value , and that is that, contrary to what Korsgaard herself initially says, it may be a mistake to contrast final value with instrumental value. If it is possible, as Korsgaard claims, that final value sometimes supervenes on extrinsic properties, then it might be possible that it sometimes supervenes in particular on the property of being a means to some other end.
Kagan also tentatively endorses this idea. If the idea is coherent, then we should in principle distinguish two kinds of instrumental value, one final and the other nonfinal. Even if it is agreed that it is final value that is central to the concerns of moral philosophers, we should be careful in drawing the conclusion that intrinsic value is not central to their concerns.
Whether this is in fact the case depends in part on just what sort of thing can be valuable for its own sake—an issue to be taken up in the next section. In light of the matter just discussed, we must now decide what terminology to adopt. Let us now turn to doubts about the very coherence of the concept of intrinsic value, so understood.
In Principia Ethica and elsewhere, Moore embraces the consequentialist view, mentioned above, that whether an action is morally right or wrong turns exclusively on whether its consequences are intrinsically better than those of its alternatives.
Some philosophers have recently argued that ascribing intrinsic value to consequences in this way is fundamentally misconceived. Philippa Foot, among others, has made a similar charge Foot He maintains that, for Moore and other proponents of intrinsic value, such value is a particular kind of moral value. Among those who do not doubt the coherence of the concept of intrinsic value there is considerable difference of opinion about what sort or sorts of entity can have such value.
Moore does not explicitly address this issue, but his writings show him to have a liberal view on the matter. There are times when he talks of individual objects e.
To what kind s of entity do such terms refer? Various answers have been given. Some such as Panayot Butchvarov claim that it is properties that are the bearers of intrinsic value Butchvarov , pp. Others such as Chisholm claim that it is states of affairs that are the bearers of intrinsic value Chisholm —69, , Still others such as Ross claim that it is facts that are the bearers of intrinsic value Ross , pp.
Lemos , ch. Ontologists often divide entities into two fundamental classes, those that are abstract and those that are concrete. Unfortunately, there is no consensus on just how this distinction is to be drawn. Most philosophers would classify the sorts of entities just mentioned properties, states of affairs, and facts as abstract.
So understood, the claim that intrinsic value is borne by such entities is to be distinguished from the claim that it is borne by certain other closely related entities that are often classified as concrete. For example, it has recently been suggested that it is tropes that have intrinsic value.
Thus the particular whiteness of a particular piece of paper is to be distinguished, on this view, from the property of whiteness. It has also been suggested that it is states, understood as a kind of instance of states of affairs, that have intrinsic value cf.
Zimmerman , ch. Those who make monistic proposals of the sort just mentioned are aware that intrinsic value is sometimes ascribed to kinds of entities different from those favored by their proposals. They claim that all such ascriptions can be reduced to, or translated into, ascriptions of intrinsic value of the sort they deem proper.
Ross would say that this cannot be the case. If there is any intrinsic value to be found here, it will, according to Ross, not reside in the pan itself but in the fact that it plays a certain role in our lives, or perhaps in the fact that something plays this role, or in the fact that something that plays this role exists. Others would make other translations in the terms that they deem appropriate. On the basis of this ascription of intrinsic value to some fact, Ross could go on to ascribe a kind of extrinsic value to the pan itself, in virtue of its relation to the fact in question.
Whether reduction of this sort is acceptable has been a matter of considerable debate. Proponents of monism maintain that it introduces some much-needed order into the discussion of intrinsic value, clarifying just what is involved in the ascription of such value and simplifying the computation of such value—on which point, see the next section.
On this point, see the last section; Zimmerman , ch. Opponents argue that reduction results in distortion and oversimplification; they maintain that, even if there is intrinsic value to be found in such a fact as that a gorgeously enameled frying pan plays a certain role in our lives, there may yet be intrinsic , and not merely extrinsic, value to be found in the pan itself and perhaps also in its existence cf.
See again the cautionary note in the final paragraph of Section 2 above. In our assessments of intrinsic value, we are often and understandably concerned not only with whether something is good or bad but with how good or bad it is. Arriving at an answer to the latter question is not straightforward. At least three problems threaten to undermine the computation of intrinsic value.
First, there is the possibility that the relation of intrinsic betterness is not transitive that is, the possibility that something A is intrinsically better than something else B , which is itself intrinsically better than some third thing C , and yet A is not intrinsically better than C.
Despite the very natural assumption that this relation is transitive, it has been argued that it is not Rachels ; Temkin , , Should this in fact be the case, it would seriously complicate comparisons, and hence assessments, of intrinsic value. Second, there is the possibility that certain values are incommensurate. For example, Ross at one point contends that it is impossible to compare the goodness of pleasure with that of virtue.
Whereas he had suggested in The Right and the Good that pleasure and virtue could be measured on the same scale of goodness, in Foundations of Ethics he declares this to be impossible, since he claims it would imply that pleasure of a certain intensity, enjoyed by a sufficient number of people or for a sufficient time, would counterbalance virtue possessed or manifested only by a small number of people or only for a short time; and this he professes to be incredible Ross , p. But there is some confusion here.
In claiming that virtue and pleasure are incommensurate for the reason given, Ross presumably means that they cannot be measured on the same ratio scale.
A ratio scale is one with an arbitrary unit but a fixed zero point. Mass and length are standardly measured on ratio scales. But incommensurability on a ratio scale does not imply incommensurability on every scale—an ordinal scale, for instance. An ordinal scale is simply one that supplies an ordering for the quantity in question, such as the measurement of arm-strength that is provided by an arm-wrestling competition.
This thesis can be traced to the ancient Greeks Plato, Philebus , 21a-e; Aristotle, Nicomachean Ethics , a , and it has been endorsed by many philosophers since, perhaps most famously by Mill Mill , paras.
One response to these puzzles eschewed by Parfit himself is to adopt the thesis of the nontransitivity of intrinsic betterness. Another is to insist on the thesis that some goods are higher than others. Such a response does not by itself solve the puzzles that Parfit raises, but, to the extent that it helps, it does so at the cost of once again complicating the computation of intrinsic value.
To repeat: contrary to what Ross says, the thesis that some goods are higher than others implies that such goods are commensurate, and not that they are incommensurate. Some people do hold, however, that certain values really are incommensurate and thus cannot be compared on any meaningful scale.
Isaiah Berlin [—], for example, is often thought to have said this about the values of liberty and equality. Whether he is best interpreted in this way is debatable. See Berlin This view constitutes a more radical threat to the computation of intrinsic value than does the view that intrinsic betterness is not transitive. The latter view presupposes at least some measure of commensurability.
If A is better than B and B is better than C , then A is commensurate with B and B is commensurate with C ; and even if it should turn out that A is not better than C , it may still be that A is commensurate with C , either because it is as good as C or because it is worse than C. But if A is incommensurate with B , then A is neither better than nor as good as nor worse than B.
Chang , There is a third, still more radical threat to the computation of intrinsic value. According to this principle, the intrinsic value of a whole must not be assumed to be the same as the sum of the intrinsic values of its parts Moore , p.
If the principle of organic unities is true, then there is scant hope of a systematic approach to the computation of intrinsic value. Broad takes organic unities of the sort that Moore discusses to be just one instance of a more general phenomenon that he believes to be at work in many other situations, as when, for example, two tunes, each pleasing in its own right, make for a cacophonous combination Broad , p. Others have furnished still further examples of organic unities Chisholm , ch.
Was Moore the first to call attention to the phenomenon of organic unities in the context of intrinsic value? This is debatable. Certainly Chisholm takes Brentano to be an advocate of organic unities Chisholm , ch. Thomas Aquinas [—] and others. Not everyone has accepted the principle of organic unities; some have held out hope for a more systematic approach to the computation of intrinsic value. However, even someone who is inclined to measure intrinsic value in terms of summation must acknowledge that there is a sense in which the principle of organic unities is obviously true.
Consider some complex whole, W , that is composed of three goods, X , Y , and Z , which are wholly independent of one another. Suppose that we had a ratio scale on which to measure these goods, and that their values on this scale were 10, 20, and 30, respectively. But notice that, if X , Y , and Z are parts of W , then so too, presumably, are the combinations X -and- Y , X -and- Z , and Y -and- Z ; the values of these combinations, computed in terms of summation, will be 30, 40, and 50, respectively.
If the values of these parts of W were also taken into consideration when evaluating W , the value of W would balloon to Clearly, this would be a distortion. Someone who wishes to maintain that intrinsic value is summative must thus show not only how the various alleged examples of organic unities provided by Moore and others are to be reinterpreted, but also how, in the sort of case just sketched, it is only the values of X , Y , and Z , and not the values either of any combinations of these components or of any parts of these components, that are to be taken into account when evaluating W itself.
The general idea is this. In the sort of example just given, each of X , Y , and Z is to be construed as having basic intrinsic value; if any combinations or parts of X , Y , and Z have intrinsic value, this value is not basic; and the value of W is to be computed by appealing only to those parts of W that have basic intrinsic value.
Gilbert Harman was one of the first explicitly to discuss basic intrinsic value when he pointed out the apparent need to invoke such value if we are to avoid distortions in our evaluations Harman
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