Par value, in finance and accounting, means stated value or face value. From this comes the expressions at par (at the par value), over par (over par value) and under par (under par value).
The term "par value" has several meanings depending on context and geography.
Stock
Par value stock has no relation to market value and, as a concept, is somewhat archaic. The par value of a stock was the share price upon initial offering; the issuing company promised not to issue further shares below par value, so investors could be confident that no one else was receiving a more favorable issue price. Thus, Par Value is a nominal value of a security which is determined by an issuing company as a minimum price. This was far more important in unregulated equity markets than in the regulated markets that exist today.
Par value also has bookkeeping purposes. It allows the company to put a de minimis value for the stock on the company's financial statement.
Many common stocks issued today do not have par values; those that do (usually only in jurisdictions where par values are required by law) have extremely low par values (often the smallest unit of currency in circulation), for example a penny par value on a stock issued at USD$25/share. Most states do not allow a company to issue stock below par value.
No-par stocks have "no par value" printed on their certificates. Instead of par value, some U.S. states allow no-par stocks to have a stated value, set by the board of directors of the corporation, which serves the same purpose as par value in setting the minimum legal capital that the corporation must have after paying any dividends or buying back its stock.
Preferred stock par value remains relevant, and tends to reflect issue price. Dividends on preferred stocks are calculated as a percentage of par value.
Also, par value still matters for a callable common stock: the call price is usually either par value or a small fixed percentage over par value.
In the United States, it is legal for a corporation to issue "watered" shares below par value. However, the purchasers of "watered" shares incur an accounting liability to the corporation for the difference between the par value and the price they paid. Today, in many jurisdictions, par values are no longer required for common stocks.
Bonds
In the U.S. bond markets, the Par Value (as stated on the face of the bond) is the amount that the issuing firm is to pay to the bond holder at the maturity date. The present value of the Par Value plus the present value of annuity of the interest payments equal the bond price.
A bond is worth its par value when the price is equal to the face value. When a bond is worth less than its par value, it is priced at a discount; conversely when a bond is valued above its par value, the bond is priced at a premium.
The practice of pricing in price per hundreds largely grew out of the practice of pricing British government bonds, which were (and still are today) denominated in units of 100 pounds Sterling. These notes, originally sold in physical form having gilt-edges and therefore known as "Gilts", are priced in similar form as US debt instruments, but are priced relative to their face value of 100 pounds Sterling. There is no subsequent shift of the decimal point applied in the pricing of such debt instruments as in the US. In the United Kingdom bond markets, par value is when the price per 100 Pounds Sterling note or bond is equal to the face value.
A par value of 100.00 for a note or bond means only that the note or bond is selling for the face value paid upon maturity of the note or bond. It can (and does) have different absolute values per Note or Bond depending on the conventions of the particular market and country in which such par value is quoted
Currency
The term "at par" is also used when two currencies are exchanged at equal value (for instance, in 1964, Trinidad and Tobago switched from British West Indies dollar to the new Trinidad and Tobago dollar, and that switch was "at par", meaning that the Central Bank of Trinidad and Tobago replaced each old dollar with a new). Another more recent example is the 1:1 (at par) exchange rate between USD and CHF in 2008.
