# 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:
* Platest: Latest transaction-related price
* Preasonable: Reasonable theoretical price
* Pma: Moving average adjusted price
### **Components Breakdown**
#### 1. **Latest Price** Platest
This is the **median** of three values:
$$
P\_{\text{latest}} = \text{Median} \left( P\_{\text{buy1}},\ P\_{\text{sell1}},\ P\_{\text{trade}} \right)
$$
Where:
* Pbuy1: Best bid (Buy 1)
* Psell1: Best ask (Sell 1)
* Ptrade: Last transaction price
#### 2. **Reasonable Price** Preasonable
Calculated as:
$$
P\_{\text{reasonable}} = P\_{\text{index}} \times \left( 1 + F\_{\text{prev}} \times \frac{t\_{\text{remain}}}{T} \right)
$$
Where:
* Pindex: Spot market index price
* Fprev: Funding rate of the **previous period**
* tremain: 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** Pma
$$
P\_{\text{ma}} = P\_{\text{index}} + \text{MA}\_5(\Delta)
$$
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:
* Pexchange(n): Exchange’s median price at time nnn
* Pindex: 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.