Definition
Mark price is a calculated reference price that derivatives platforms use to represent the fair value of a contract at a given moment. It typically combines data such as the underlying asset’s index price and recent trading activity to smooth out short‑term spikes or manipulation in the last traded price. By relying on this reference instead of the most recent trade, exchanges aim to provide a more stable and objective benchmark for valuing open positions.
In markets for instruments like perpetual futures, the mark price is central to how unrealized profit and loss are measured on open positions. It is also the key price used when determining whether a position has reached the threshold for liquidation, rather than using the sometimes erratic last traded price. This makes the mark price a core risk‑management concept in leveraged trading environments.
Context and Usage
On many crypto derivatives exchanges, the mark price is derived from an index price of the underlying asset, often combined with other inputs such as funding rate components or short‑term premium and discount measures. This construction helps align the contract’s valuation with broader market conditions instead of relying solely on activity within a single order book. As a result, sudden wicks or thin liquidity on one venue have less impact on how positions are valued.
Because liquidation decisions are based on the mark price, traders’ exposure to abrupt, isolated price moves is reduced, even when open interest is high and markets are volatile. The mark price also interacts conceptually with the funding rate in perpetual futures, since both mechanisms are designed to keep contract prices anchored near the underlying index price. Overall, the mark price serves as a stabilizing reference point that underpins fair valuation and risk controls in crypto derivatives markets.