Glossary and Formulae

Glossary

Index Price: aggregated spot reference price derived from external oracle sources; baseline for mark price, funding, and risk calculations
Mark Price: manipulation-resistant fair-value estimate computed from index price, funding rate, and order-book data; used for margin evaluation, PnL, and liquidation triggers
IM (Initial Margin): collateral required to open or increase a position
MM (Maintenance Margin): minimum collateral required to maintain a position before liquidation is triggered
Collateral Ratio (Haircut): discount factor applied to a non-USDC asset's market value when computing its contribution to usable collateral (USDC ratio = 1.0)
Open Interest (OI): total outstanding position size across all accounts, counted double-sided (long size + short size); a 1 BTC long matched by a 1 BTC short yields 2 BTC of OI
OI Cap: per-market open-interest ceiling; risk-increasing orders are rejected when aggregate open interest reaches this limit
Bankruptcy Price: the price at which account equity reaches zero for the relevant position set; defines the boundary between insured loss and socialized loss
ADL (Auto-Deleveraging): forced counterparty reduction triggered when liquidation losses exceed insurance fund and backstop capacity

Formula Index

Mark Price

\text{Mark Price} = \text{Median}(P_1, P_2, \text{Last Traded Price})

Funding Rate

\text{Funding Rate} = \text{clamp}\left(\frac{\text{Average Premium Index}}{8},\ -1\%,\ +1\%\right)

The premium index is averaged over a 1-hour rolling window of 60 one-minute samples. The divisor 8 is the standard 8h-to-1h scaling convention.

Funding Payment

\text{Funding Payment} = \text{Position Size} \times \text{Mark Price} \times \text{Funding Rate}

Unrealized PnL

\text{Unrealized PnL} = \text{Size} \times \text{Mark Price} + \text{Quote Balance}

Size is signed (positive for long, negative for short) and Quote Balance is the position's signed running quote balance, which accumulates every fill, so this holds exactly across partial fills and weighted-average entry. For a single-entry position it reduces to $(\text{Mark Price} - \text{Entry Price}) \times \text{Size}$ for longs and $(\text{Entry Price} - \text{Mark Price}) \times \text{Size}$ for shorts.

Weighted Entry Price Update

\text{New Entry} = \frac{(Q_{\text{existing}} \times P_{\text{existing}}) + (Q_{\text{new}} \times P_{\text{new}})}{Q_{\text{existing}} + Q_{\text{new}}}

On a full close, position resets. On a side flip (e.g., long to short in a single fill), the entry price resets to the fill price of the new side's first fill.

Initial Margin Requirement

\text{IM Requirement} = \sum_i \left(\text{Notional}_i \times \text{IM Rate}_i\right)

Maintenance Margin Requirement

\text{MM Requirement} = \sum_i \left(\text{Notional}_i \times \text{MM Rate}_i\right)

Haircut-Adjusted Collateral Value

\text{Collateral Value}_i = \text{Market Value}_i \times \text{Collateral Ratio}_i

Glossary and Formulae

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