How Is the Funding Rate Calculated in a Typical Cryptocurrency Exchange?

The funding rate is typically calculated using the difference between the perpetual contract's price (the Mark Price) and the Index Price, known as the basis. This basis is then multiplied by a factor and sometimes includes an interest rate component.

The formula aims to measure the premium or discount of the contract price relative to the spot market. The resulting rate is paid or received at set intervals, usually every eight hours.