What Role Does ‘Mark Price’ Play in Margin and Liquidation?
The mark price is a fair price calculation used by the exchange to determine a position's unrealized profit and loss (PnL) and, crucially, to calculate the margin level. It is typically a composite price derived from the spot price and the contract's moving average, designed to prevent manipulation from temporary spikes in the last traded price.
Liquidation is triggered when the mark price causes the margin level to fall too low.
Glossar
Mark Price
Valuation ⎊ The Mark Price within cryptocurrency derivatives represents a fair value estimation, calculated to mitigate price manipulation and ensure orderly market functioning, particularly during periods of low liquidity or volatility.
Fair Price Calculation
Valuation ⎊ Fair price calculation within cryptocurrency derivatives necessitates a nuanced approach, diverging from traditional financial models due to market microstructure and informational asymmetries.
Unrealized Profit and Loss
Valuation ⎊ Unrealized profit and loss within cryptocurrency, options, and derivatives represents the hypothetical gain or loss calculated based on the current market price of an asset or contract, contrasted with its initial cost basis.