What Are the Risks of Using a ‘Mark Price’ versus a ‘Last Price’ for Liquidation Triggers?

The 'last price' (the price of the last executed trade) can be easily manipulated, especially in illiquid markets, leading to unfair liquidations. The 'mark price' is an estimated true value, often calculated using a combination of the spot price, a moving average of the futures price, and the funding basis.

Using the mark price reduces the risk of malicious liquidation but introduces the risk of the mark price deviating from the actual executable price.