The Mark Price is the fair price reference the system uses for each Perpetual Contract to calculate unrealized profit and loss (PnL, the profit or loss on an open position that has not been closed), the maintenance margin ratio (the minimum margin you must keep, expressed as a percentage), and whether forced liquidation is triggered. It is not the latest trade price.

What the Mark Price is used for

The Mark Price is used to:

• - Calculate the unrealized PnL of your position.
• - Determine whether forced liquidation is triggered.
• - Calculate the maintenance margin ratio.
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Two key points:

1. 1. The Mark Price measures unrealized PnL, but it does not change your actual profit or loss. Realized PnL is recorded only when you close your position or when it is forcibly liquidated.
2. 2. Forced liquidation happens only when the Mark Price reaches your liquidation price. A sudden move in the latest trade price does not by itself trigger liquidation, as long as the Mark Price has not reached the liquidation threshold.
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Why the Mark Price is not the latest trade price

If the latest trade price were used directly, a small number of large orders or thin order book depth (few buy and sell orders near the market price) could push the price briefly. A single abnormal trade could then trigger forced liquidation on positions that are otherwise healthy.

The Mark Price is designed to:

• - Prevent market manipulation, which avoids incorrect liquidations caused by abnormal trades or thin order books.
• - Smooth price volatility, filtering short-term price spikes to give a stable risk management benchmark.
• - Reflect funding costs, by including the funding rate to reflect the time value of long and short positions.
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How the Mark Price is calculated

The system combines three price components. It then selects a calculation path based on its current state, and applies a clamp (a limit that keeps the price within a set range) around the Index Price.

Component 1: Funding Rate Adjusted Price

Formula:

Funding Rate Adjusted Price = Index Price x (1 + Funding Rate x Hours Until Next Settlement / Funding Rate Collection Period)

Purpose: this converts the funding rate into a price offset, so the Mark Price moves smoothly within the settlement cycle and avoids large jumps near settlement.

Component 2: Latest Trade Price

Purpose:

• - Reflects actual market trade conditions.
• - Used to calculate the basis between perpetual contracts and spot prices.
• - Takes part in the median calculation (see Section 3).
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Component 3: Mid-Price Basis Fair Value

Purpose: this component uses a moving average of the basis between the order book mid-price and the Index Price over a time window. It filters out short-lived order book movements.

Formulas, in order:

3. 1. Order Book Mid-Price = (Best Bid + Best Ask) / 2
4. 2. Basis = Mid-Price - Index Price
5. 3. Moving Average of Basis = (Basis 1 + Basis 2 + … + Basis N) / N
   • - N is the number of valid sample points within the time window (the Basis Moving Average Window, measured in seconds).
   • - Basis i is the basis at each sampling moment.
6. 4. Mid-Price Basis Fair Value = Index Price + Moving Average of Basis
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Final Mark Price

The final Mark Price is the raw price, clamped within a band around the Index Price:

Final Mark Price = clamp(Raw Mark Price, Index Price x (1 - Deviation Coefficient), Index Price x (1 + Deviation Coefficient))

The Raw Mark Price depends on the system state:

• - Normal path: the median of three values: Funding Rate Adjusted Price, Latest Trade Price and Mid-Price Basis Fair Value.
• - Observation period path (during market anomalies): Mid-Price Basis Fair Value only.
• - Fallback path (if the normal calculation cannot be completed): the last cached price or the Index Price.
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The Deviation Coefficient is 0.5 percent in the source article, and the article states that it is not fixed. See the reviewer notes.

Summary

The Mark Price combines the Index Price, the funding rate, the order book basis and the latest trade price. It uses a median, an observation-period rule, a fallback rule and a clamp, so that it resists manipulation. Forced liquidation is based on the Mark Price, not on the latest trade price. Monitor the distance between your position’s Mark Price and its liquidation price, and manage leverage to reduce unnecessary liquidation risk.

For how liquidation is triggered, see the liquidation rules article: https://global.vantagehelpcenter.com/hc/en-us/articles/17930611801231-Perpetual-Contract-Liquidation-Rules