market price

1. General: Unique price at which buyers and sellers agree to trade in an open market at a particular time. In formal markets (such stock exchanges) there are two market prices: the offer (selling) price which is higher, and bid (buying) price that is lower. The difference between these two price is called margin or spread.

2. Accounting: Transfer price of a good or service (traded between a subsidiary and its parent) at which the profit of the whole enterprise will be maximized.

3. Bond market: Last reported price exclusive of accrued interest, also called clean price.

4. Securities trading: Current market price as indicated by the latest recorded trade. See also market value.

Options should be structured carefully. Absent special factors, they should have built into them a retained-earnings or carrying cost factor. Equally important, they should be priced realistically. When managers are faced with offers for their companies, they unfailingly point out how unrealistic market prices can be as an index of real value. But why, then, should these same depressed prices be the valuations at which managers sell portions of their businesses to themselves? Except in highly unusual cases, owners are not well served by the sale of part of their business at a bargain price -- whether the sale is to outsiders or to insiders. The obvious conclusion: options should be priced at true business value.