Define: Active Market

UK Accounting Glossary

Definition: Active Market

Quick Summary

What is the dictionary definition of Active Market?

Dictionary Definition

A market for assets of a particular class in which transactions occur often and in relatively high volumes.

This concept is important in fair value accounting.

If there is no active market, then up-to-date pricing information may potentially be scarce and it will accordingly be inappropriate to value an asset by marking to market. In such examples, an asset may need to be valued using a recognised pricing model (perhaps marking to model).

Assets for which there is rarely an active market may include customised or complex derivative products.

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