Mark Price Calculation for Futures Contracts: A Breakdown

The mark price is a crucial component in futures trading, used to determine unrealized profits and losses, as well as liquidation prices. Here's how different exchanges calculate mark prices for futures contracts:

Exchange-Specific Mark Price Calculations

- *Binance*: For pre-market perpetual futures contracts, the mark price is calculated using the average of the last 10 seconds of trade prices, updated every second. If there are less than 21 transaction prices in the 10-second interval, the average price index is based on the last 100 transaction prices. During the transition period to standard perpetual futures contracts, the mark price converges from the pre-market mark price to the standard mark price calculation (Median of Price 1, Price 2, and Contract Price).

- *KuCoin*: KuCoin calculates the mark price using the index price plus a basis moving average. The basis moving average is the moving average of the contract median price minus the index price.

- *Bybit*: Bybit's mark price calculation for perpetual contracts is based on a global spot price index plus a decaying funding basis rate. The formula is: Mark Price = Median (Price 1, Price 2, Last Traded Price), where Price 1 = Index Price × [1 + Last Funding Rate × (Time Until Funding / 8)] and Price 2 = Index Price + Moving Average (5-minute Basis).

Key Considerations

- *Reducing unnecessary liquidation*: Mark prices help reduce unnecessary liquidation in abnormal market conditions by taking into account both spot index prices and moving averages.

- *Market volatility*: Exchanges may adjust mark price calculations in response to market volatility to ensure fair trading environments.

- *Differences between exchanges*: Mark price calculations can vary between exchanges, so it's essential to understand the specific calculation methodology used by each exchange ¹ ² ³.