Mark Price
The mark price represents a fair price in the exchange's contract market.
What is the mark price?
The last price in the market is changing rapidly, and it may be maliciously manipulated, causing unnecessary liquidation. Therefore, the mark price was born. The trend of the mark price is relatively stable, which helps improve the contract market's stability.
Mark price is used in the following scenarios:
Control liquidation: trigger forced selling when the mark price reaches the liquidation price
Regular settlement income: use the mark price to settle income when regular settlement
Calculation of mark price
The mark price aims to express the real price trend of the contract market, but it must follow the constraints of the external index price, which means that it must retain a certain degree of sensitivity in the market, but not too sensitive. Therefore, the following three prices are introduced:
Last price: The last price of this market, is sensitive, with the latest market sentiment.
Fair price: The fair price from the outside world plus the price calculated by the current market sentiment, is reasonable, but the perception of the latest sentiment in the market is not enough.
Moving average price: EMA price, is stable, and effectively eliminates needles (exchange spikes).
We used the median of the three prices as the final mark price to get the strengths of each of the three prices and filter out the shortcomings of each.
The mark price is calculated every second.
Mark price = Median(last price, fair price, moving average price)
The specific calculation of the three prices is as follows:
Price 1: last price
Last price = Median (bid 1 price, ask 1 price, last transaction price)
The last price represents the most sensitive price trend in the market. The advantage of using the median is that even if there is no last transaction, the market trend can be captured in time and included in the calculation.
Price 2: fair price
Fair price = index price * (1 + funding rate of the previous period * (time until the next funding fee is charged / funding rate collection interval))
The funding rate represents market sentiment, the interval fraction represents the decay trend of sentiment, and the fair price represents the fair price value of the contract market based on the last market sentiment.
Price 3: moving average price
Moving Average Price= Index Price + 5-Minute Moving Average (Spread)
Spread = last price - index price
The moving average price is similar to the EMA indicator in the K-line indicator, and the price runs smoothly, while the EMA spread retains market sentiment and the latest changes.
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