Perpetual swap funding – Deribit Official
You can also click ‘Funding’ at point B to open the funding rate pop up chart.
On this screen, you can see the current funding rate, the average rate over the last 8 hours, and a chart displaying how the funding rate has changed over the last 8 or 24 hours.
You will notice how all the rates quoted are 8-hour rates. The 8-hour rate is displayed to make comparison simpler and is just the amount you would pay/receive if the funding rate remained the same for 8 hours. However, it is actually calculated in real-time and transferred every few seconds, therefore, in reality, it is a small time-based fraction of the 8-hour rate.
The funding mechanism has one purpose, and that is to keep the price in line with the index. Deribit does not charge any fees on funding and all funding is transferred directly between the parties trading the perpetual contracts. This makes the funding a zero-sum game, where longs receive all funding from shorts, or shorts receive all funding from longs.
Calculations of the funding rate for the Bitcoin Perpetual and Ethereum Perpetual are identical.
The funding rate percentage, expressed as an 8-hourly interest rate, is calculated as follows at any given point in time:
- First, we calculate the Premium Rate:
Premium Rate = ((Mark Price — Deribit Index) / Deribit Index) * 100%
- Second, we calculate the Funding Rate:
From the Premium Rate, the Funding Rate can be calculated by applying a dampener. If the Premium Rate is within -0.05% and 0.05%, the actual Funding Rate will be reduced to zero.
- If the premium rate is lower than -0.05%, then the actual funding rate will be the Premium rate + 0.05%.
- If the premium rate is higher than 0.05%, then the actual funding rate will be the Premium rate — 0.05%.
- Funding Rate = Maximum (0.05%, Premium Rate) + Minimum (-0.05%, Premium Rate)
- Finally, we calculate the Time Fraction:
Time Fraction = Funding Rate Time Period / 8 hours
The actual Funding Payment is calculated by multiplying the Funding Rate by the position size in BTC and the Time Fraction.
Funding Payment = Funding Rate * Position Size BTC * Time Fraction
For the full funding rate calculations and more examples, you can view the Deribit knowledge base here:
https://www.deribit.com/pages/docs/perpetual
Course Credit(s):
Cryptarbitrage
Cryptocurrency Exchange Expert
MrJozza
Cryptocurrency Exchange Expert
Published at Sat, 26 Oct 2019 13:41:41 +0000
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