What Is the Role of the Mark Price in Determining the Liquidation Price?

The mark price is a more reliable, globally-averaged price used by the exchange to calculate a position's unrealized profit/loss and, critically, the liquidation price. It is often derived from an index price across multiple exchanges, plus a decaying funding rate basis.

This is done to prevent malicious manipulation of the last traded price on a single exchange from unfairly triggering liquidations. The liquidation engine compares the mark price to the liquidation price.