Mark Price

Overview

To improve the stability of the contract market and reduce unnecessary forced liquidations during periods of high volatility, the system uses a marked price rather than the last traded price. The marked price is used to:

• Calculate a user's unrealized profit and loss (PnL)

• Trigger forced position reductions (liquidations) when necessary

Marked Price Formula

$$\text{Marked Price} = \text{Median} \left( P_{\text{latest}},\ P_{\text{reasonable}},\ P_{\text{ma}} \right)$$

Where:

• P_latest: Latest transaction-related price

• P_reasonable: Reasonable theoretical price

• P_ma: Moving average adjusted price

Components Breakdown

1. Latest Price P_latest

This is the median of three values:

$$P_{\text{latest}} = \text{Median} \left( P_{\text{buy1}},\ P_{\text{sell1}},\ P_{\text{trade}} \right)$$

Where:

• P_buy1: Best bid (Buy 1)

• P_sell1​: Best ask (Sell 1)

• P_trade​: Last transaction price

2. Reasonable Price P_reasonable

Calculated as:

$$P_{\text{reasonable}} = P_{\text{index}} \times \left( 1 + F_{\text{prev}} \times \frac{t_{\text{remain}}}{T} \right)$$

Where:

• P_index: Spot market index price

• F_prev​: Funding rate of the previous period

• t_remain​: Time remaining until the next funding fee settlement

• T: Funding fee settlement interval (e.g., 480 minutes for 8-hour cycles)

3. Moving Average Price P_ma​

$$P_{\text{ma}} = P_{\text{index}} + \text{MA}_5(\Delta)$$

Where:

• MA₅(Δ): 5-minute moving average of the spread

• Spread Δ(n) is defined as:

$$\Delta(n) = P_{\text{exchange}}(n) - P_{\text{index}}(n)$$

And:

• P_exchange(n): Exchange’s median price at time nnn

• P_index: Index price at time nnn

Summary

The marked price integrates:

• Short-term trading dynamics

• Fair value via funding-adjusted index pricing

• Smoothing through moving averages

This hybrid pricing mechanism enhances risk control and protects users from unfair liquidations during momentary price spikes or dips.