Mark Price

Mark price is the estimated fair value of a derivative contract used for calculating unrealized profit or loss and triggering liquidations. It is distinct from the last traded price, which can be highly volatile and susceptible to manipulation on low-liquidity exchanges.

By using a smoothed mark price, protocols protect traders from temporary price spikes that might otherwise cause unfair liquidations. This is typically calculated using a weighted average of prices from multiple exchanges or through a funding rate adjustment.

It serves as the reference point for the maintenance margin checks within the system. For traders, understanding the mark price is vital because it determines when their position will be liquidated.

It creates a more stable trading environment by filtering out market noise. Consistent and transparent mark pricing is essential for the integrity of derivative markets.

It ensures that liquidations are based on the actual market consensus rather than individual exchange anomalies.