How Is the Funding Rate Calculated Based on the Difference between the Contract and Index Price?

The funding rate is generally calculated using a formula that incorporates two main components: the Interest Rate Component and the Premium/Discount Component. The Premium/Discount Component is the key factor, derived from the difference between the perpetual contract's Mark Price and the Index Price.

A positive difference leads to a positive rate, and a negative difference leads to a negative rate. The formula ensures the rate reflects the market's deviation from the spot price.