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

Marked Price=Median(Platest, Preasonable, Pma)\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:

Platest=Median(Pbuy1, Psell1, Ptrade)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:

Preasonable=Pindex×(1+Fprev×tremainT)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

Pma=Pindex+MA5(Δ)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:

Δ(n)=Pexchange(n)Pindex(n)\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.

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