Derivatives · Concept note
Mark Price
A venue-calculated reference price commonly used for unrealized P&L and liquidation instead of the latest traded price.
Definition
Mark price is designed to reduce forced liquidations caused by a brief, isolated trade on one order book. A derivatives venue usually derives it from an external spot index plus a funding-basis or premium component. The exact formula, update interval, caps, and fallback rules are venue-specific.
Why it matters
A position can be liquidated even when the last-price chart never appears to touch the displayed liquidation level, because the account event may use mark price. Traders should map the price used for liquidation, stop triggers, P&L, and settlement before sizing a position.
Calculation and example
Illustrative mark price = index price + bounded funding-basis or premium component
Suppose the last BTC trade is $60,150, the venue index is $60,000, and its bounded premium adds $30. A mark price of $60,030 may determine unrealized P&L and liquidation even though the chart headline shows $60,150. The venue formula, not this simplified example, is authoritative.
What to check when interpreting it
- Identify which account events use mark, index, or last price.
- Check index constituents, update timing, outlier handling, and fallbacks.
- Reconcile a liquidation with timestamped mark-price and account records rather than a last-price candle alone.
Common misconception
Mark price is not a prediction of the next market price and is not guaranteed to equal the best executable price.