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What Is the Purpose of the “Interest Rate Component” in the Funding Rate Calculation?

To account for the difference in interest rates between the base and quote currencies, similar to cost of carry.
Greeks.Live24.11.25

What Is the Purpose of the “Interest Rate Component” in the Funding Rate Calculation?

The interest rate component is a small, fixed percentage added to the funding rate formula to account for the difference in interest rates between the two currencies involved in the contract. It reflects the cost of holding the base currency versus the quote currency, similar to the cost of carry in traditional futures.

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What Is the Standard Interest Rate Component Often Used in the Funding Rate Calculation?

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