In the context of options (stock options) and similar instruments (tradable and non-tradable), it is the difference between the fair value of the underlying shares to which a counterparty is granted conditional or unconditional right to subscribe or the right to receive, and the price that will be paid for those shares, now or in the future. In specific situations, the shares may be granted gratis (the counterparty pays nothing).

Intrinsic value = fair value of underlying shares – price

The price is known as the exercise price or strike price.

For example, if a stock option has an exercise price of CU100, on a share which currently has a fair value of CU115, then the intrinsic value of the option is

Intrinsic value = 115 – 100 = CU15