Perpetuals mark price

Overview

On Aster Perpetuals, the Mark Price acts as a reference price to calculate a trader’s unrealized profit and loss (PnL) and to trigger liquidations. Its main purpose is to reduce unnecessary forced liquidations during periods of abnormal market volatility and to ensure fair and accurate pricing for perpetual contracts. Unlike the last traded price, which may be affected by sudden market swings or manipulation, the Mark Price offers a more stable and reliable benchmark.

Price Index

The Price Index is a weighted average of prices from major spot exchanges, such as Binance, Huobi, Kraken, and other key markets. Exchanges with higher trading volume carry greater weight in the index. This index represents the “fair value” of an asset’s spot price and is the primary component used to calculate the Mark Price, which in turn is crucial for determining unrealized PnL and liquidation levels.

Example: For BTC perpetual contracts, the index might include BTC/USDT prices from Binance, Kraken, and Huobi, weighted by trading volume, to reflect the fair spot price of BTC.

How the Mark Price is Calculated

The mark price is determined by taking the median of three prices:​

• Price 1: Price index × (1 + Funding rate × (Time to next funding rate in hours ÷ 8))

• Price 2: Price index + 5-minute moving average

• Contract Price: The current contract price​

The 5-minute moving average is calculated by sampling every minute over a 5-minute interval:​

Moving average = Average of ((bid 1 + ask 1) ÷ 2 − Price index)​

The mark price is the median of Price 1, Price 2, and the Contract Price. For example, if Price 1 < Price 2 < Contract Price, then Price 2 is selected as the Mark Price.​

Protective Measures During Abnormal Market Conditions

In cases of significant deviations between price sources or abnormal market conditions causing large differences between the spot price and the mark price, Aster Pro may implement precautionary measures:​

• Single exchange deviation: If the last price from a particular exchange deviates by more than 5% from the median price of all sources, that exchange's price weight is set to zero.

• Multiple exchange deviations: If multiple exchanges show deviations by more than 5%, the median price of all sources is used as the index value instead of the weighted average.

• Exchange connectivity issues: If any exchange fails to update its price feed within 3 seconds, that source is removed from the price index calculation. This prevents outdated prices from influencing the mark price.

• Last trade price protection: If the latest contract trade deviates by more than 5% from the Mark Price and no new trade occurs within 5 seconds, the Contract Price is replaced with the current Mark Price in calculations. This prevents the system from using stale or potentially manipulated trade prices in liquidation-related processes.

These measures ensure that the Mark Price remains fair and that liquidations are triggered based on realistic market conditions.

Why Mark Price is important?

• Unrealized PnL: Determines unrealized PNL for open positions.

• Liquidation reference: Prevents unfair liquidation due to sudden spikes in contract prices.

• Funding calculations: Influence funding payments between long and short positions.

Summary

The Mark Price on Aster Perpetuals is designed to protect traders from unnecessary liquidations and to provide a stable reference for both PnL and contract valuation. By using a combination of price index, moving averages, and the latest contract price, and by applying protective measures during extreme conditions, the Mark Price ensures fairness even in volatile markets.

Frequently Asked Questions (FAQs)

1. What is the difference between Mark Price and Last Price?

• Mark Price: A reference price used to calculate unrealized PnL and to trigger liquidations, designed to prevent unfair forced liquidations.

• Last Price: The most recent trade price on the contract. It reflects actual market transactions but can fluctuate more quickly during high volatility periods.

2. How is the Price Index calculated? The Price Index is a weighted average of spot prices from major exchanges. Exchanges with higher trading volumes carry more weight. It represents the fair market value of the asset.

3. Why does Aster use a median of three prices to determine the Mark Price? Using the median of the Price Index with funding adjustment, moving average, and contract price helps smooth out sudden spikes or drops, reducing unnecessary liquidations.

4. What protective measures exist if market conditions are abnormal?

• If one or more exchanges deviate significantly (>5%) from the median, their influence is reduced or removed.

• If trade prices stray far from the Mark Price with no updates, the system replaces the contract price with the Mark Price in calculations.

• Exchanges with delayed feeds are temporarily excluded from the Price Index.

5. Can the Mark Price differ from the actual market price? Yes. During high volatility or abnormal market conditions, the Mark Price may deviate from the last price.

6. How Mark Price affect liquidations? The Mark Price acts as a reference price to calculate a trader’s unrealized profit and loss (PnL) and to trigger liquidations.

7. Is the Mark Price used for funding payments? Yes. Funding payments between long and short positions are calculated using the Mark Price to maintain fairness.