1. What is mark price?
Mark price is a reference price applied to calculate unrealized profit and loss of users, as a tool to reduce unnecessary forced liquidation in an abnormal volatile market and improve the stability of contracts market.
2. How to calculate mark price?
Mark price = Spot index price + Basis moving average
Basis moving average
= Moving average (Mid price of contract - Spot index price)
= Moving average [(Best ask price of contract + Best bid price of contract) / 2 - Spot index price]
The mark price takes into account both the spot index price and the moving average of the basis. The moving average mechanism reduces the fluctuations in the short-term contract price and reduces unnecessary forced liquidation caused by abnormal volatility.
3. Use cases
Calculation of unrealized profit and loss of contract
1) Crypto-margined contract
PnL of long position = Face value * |Contracts number| * Multiplier * (1 / Avg. open price - 1 / Avg. mark price)
PnL of short position = Face value * |Contracts number| * Multiplier * (1 / Avg. open price - 1 / Avg. mark price)
2) USDT-margined contract
PnL of long position = Face value * |Contracts number| * Multiplier * (Avg. mark price - Avg. open price)
PnL of short position = Face value * |Contracts number| * Multiplier * (Avg. open price - Avg. mark price)