Index prices for futures contracts are calculated by referencing the spot prices reported by the various major exchanges.
The index prices for AscendEX’s perpetual futures contracts are calculated by averaging the spot prices of Binance, Huobi, OKEx, Poloniex and AscendEX after excluding the highest and lowest prices.
Index prices can help effectively avoid futures price manipulation as they take reference to the spot prices of several exchanges rather than those of one exchange. A single market may face a greater risk of price manipulation, but multiple markets are much less likely to encounter price manipulation at the same time. The use of index price system will effectively reduce the potential impact of a single market on the entire market. Index prices calculated by taking reference to the spot prices of many mainstream exchanges reflects the overall price level of the crypto futures market.
Mark prices are an estimate of the reasonable price of a perpetual contract. Marked prices only affect the unrealized PnL and forced liquidation price but does not affect the realized PnL.
The Mark Price = Index Price + Price Premium
Mark prices are used to calculate the unrealized PnL and take it as the basis for forced liquidation, preventing unreasonable margin calls. Since unrealized PnL is the key to the forced liquidation of futures positions, it’s of great significance to precisely calculate the unrealized PnL for avoiding unnecessary forced liquidation. As traditional futures trading often utilizes the last traded price to calculate the unrealize PnL, futures positions will be liquidated in the event of malicious manipulation in the market, or price fluctuations caused by poor liquidity, etc. However, mark prices are usually taken to calculate the unrealized PnL of perpetual futures positions. Compared with the last traded price, the mark price takes reference to the spot prices and premiums of multiple exchanges for calculating unrealized PnL, so it’s more suitable to be taken as the basis for forced liquidation to effectively prevent unnecessary forced liquidation due to severe market turmoil or poor liquidity, helping protect users’ interest, cut unnecessary losses, and enhance the futures market stability.
How to Check Mark Prices and Index Prices?