Index & mark price calculations

Index & mark price calculations

Drixx relies on mark prices to determine margining and risk. These mark prices depend on index prices and fair prices. We have provided example calculations for the Drixx Bitcoin Index below (though similar calculations can be made for other indicies with different parameters).

Index Price


The index prices track spot prices across multiple exchanges. For the Drixx Bitcoin Index:

The Drixx Bitcoin index tracks the price of bitcoin across multiple exchanges. It is calculated and updated every 5 seconds. The following steps are taking to obtain the index price:

  • We define the “mid-price” as the average of the bid and ask prices.
  • Every 5 seconds, we use the last mid-price that is received from an exchange.
  • High latency exchanges (response rate too slow or offline) are excluded from the calculation
  • We calculate the median mid-price among all the represented exchanges
  • Any outliers (defined as greater than a 0.5% deviation from the median price) is capped the 0.5% deviation max.

       

       Price Cap = Median Price * 1.005

       Price Floor = Median Price * 0.995

       Capped Exchange Mid-Price = max(Price Floor, min(Exchange Mid-Price, Price Cap))

  • The Bitcoin Index price is the average of the capped exchange mid-prices.
  • For a full list of exchanges, see the Indices.


Impact Price

The impact price is that average price attainable when you buy or sell a pre-determined quantity of the derivative contract. This quantity is specified in the instrument contract.

  • In general options will have an impact quantity of 0 (ie, the impact bid and ask are just the best bid and ask). This is because different options strikes will have varying levels of liquidity.
  • The impact bid is the average price achievable when you sell a pre-determined quantity of derivative contract. The impact ask is the average price achievable when you buy a pre-determined quantity of derivative contract.
  • The impact price is based on the settlement currency of the contract (not the quoted currency). For example, a BTC option settles in BTC. A BTC perpetual (even though quoted in USD) is settled in BTC.
  • Example – calculating the impact ask price:

    Let us assume that the BTC perpetual contract has an impact quantity of 1.0 BTC and the order book has the following sell orders – we run the following calculation:

PriceSizeBTC Size (Size / Price)Impact Size (sums up to 1 BTC)USD Size (Impact Size * Price)
910010000.109890110.10989011
1000
9200
5000
0.543478261
0.543478261
5000
9300
10000
1.075268817
0.346631629
3223.6742






Impact Ask = sum (USD Size) / sum (Impact Size)
9223.6742



  • To make sure moments of illiquidity do not unnecessarily affect the impact prices, we clamp the difference between the best bid and ask and the impact bid and ask prices in the fair price calculation. This cap is specific on contract.
  • Clamped impact bid = max (impact bid price, best bid * (1 – clamp percentage)).
  • For example, assume a clamp percentage of 1%. If the impact bid price is $9,000 and the best bid is $10,000:
  • Capped impact bid = max (9000, 10000 * 0.99) = 9900.
  • Clamped impact ask = min (impact ask price, best ask * (1 + clamp percentage))
  • For example, assume a clamp percentage of 1%. If the impact ask price is $9,000 and the best bid is $8,000:
  • Capped impact ask = min (9000, 8000 * 1.01) = 8080.


Fair Price


  • The fair price is the average of the clamped impact bid and ask prices. This price is a key component of the mark price [see mark price].


Mark Price

  • The mark price is the price that is used to determine unrealized P&L, margins, and potential liquidations. Due to the volatility of the assets, we often use a fair pricing calculation (not simply the last traded price or mid-price) to avoid unnecessary liquidations. We calculate the mark price differently for each instrument type.
  • Perpetual
  • Mark price = Fair price + 30 second EWA of (fair price – index price). See contract details for impact depth and clamp.
  • Futures
  • Mark price = Fair price. See contract details for impact depth and clamp.
  • We are constantly evaluating the mark prices of each derivative to update your margins and P&L. This mark data is available in 5 second intervals for users.