A market where transactions involving an asset or a liability occur in a frequency and volume enough to establish a reliable source of pricing information on an ongoing basis. In mainstream practice, the quoted market price in an active market is used as the basis for the measurement of the fair value of an asset/ liability.

An active market is by nature a liquid market: there are so many buyers and sellers who stand ready to transact and are interested in transacting in the asset/ liability, rendering the bid-ask price spread very small.

This notion is key to fair value accounting. If there is no active market, then up-to-date pricing information may not be available and it will consequently be irrelevant to value an asset by marking it to market (MTM). In such cases, the value of an asset may need to be established using an alternative pricing model (such as the so-called marking to model).

Examples of assets for which there is an active market include stocks, bonds, units, etc. Assets for which there is scarcely an active market include complex derivative products.