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What is time value and how does it affect the price of a warrant?

Time value is the value of a warrant arising from the time left to maturity and is equal to the difference between the current warrant price and its intrinsic value. The time value can be considered as the cost paid in return for the gearing effect. In general, the longer the time to expiry, the higher the probability that the underlying price will move in favour of the warrant holder and hence a higher warrant price. However, the time value of a warrant will become zero when the warrant has reached maturity, this is sometimes referred to as the time decay of a warrant.