How Does the Mark Price Affect the Calculation of ‘Maintenance Margin’?
The mark price is used to calculate the current value of a trader's position and, consequently, their equity in the derivatives account. The maintenance margin is a percentage of this equity.
By using the mark price (the fair, oracle-derived price) instead of the last traded price, the exchange ensures that the calculation of a trader's margin and the subsequent liquidation threshold is based on a robust, manipulation-resistant value, protecting traders from unfair liquidations.
Glossar
Liquidation Threshold
Forced Sale Trigger ⎊ This is the precise ratio of debt to collateral value at which a decentralized lending protocol automatically initiates the liquidation of a user's pledged assets to ensure the protocol maintains sufficient solvency against outstanding loans.
Maintenance Margin
Collateral ⎊ Within cryptocurrency derivatives and options trading, the maintenance margin represents the minimum equity a trader must maintain in their account to cover potential losses.
Mark Price
Valuation ⎊ The Mark Price within cryptocurrency derivatives represents a fair value estimation, calculated to mitigate price manipulation and ensure orderly market functioning, particularly during periods of low liquidity or volatility.