100 lines
4.0 KiB
Markdown
100 lines
4.0 KiB
Markdown
> ## Documentation Index
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> Fetch the complete documentation index at: https://docs.polymarket.com/llms.txt
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> Use this file to discover all available pages before exploring further.
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# Funding
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> Funding rate calculation and settlement
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Unlike futures contracts, perpetuals have no expiry date. Funding is the
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mechanism that keeps the perpetual price anchored to the underlying's fair value.
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When the perpetual trades above Index, longs pay shorts. When it trades below
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Index, shorts pay longs.
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Funding runs continuously across all sessions, regardless of whether the
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underlying reference market is open. This keeps the convergence incentive active
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and prevents positions from being left unanchored from fair value.
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## How Funding Works
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Funding is computed in three stages:
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1. A premium index is sampled from the order book every 5 seconds.
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2. Samples are averaged over the 1-hour charge window to produce an hourly rate.
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3. The rate is settled against every open position at the end of the window.
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### Premium Index
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Every 5 seconds, the protocol takes one snapshot per market of how far the book
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has drifted from Index. It walks the book for a fixed quote notional on each side.
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```text theme={null}
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bid_impact = VWAP of top bids filling 1,000 quote notional
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ask_impact = VWAP of top asks filling 1,000 quote notional
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```
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If one side of the book cannot fill the notional because it is too thin or empty,
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that side falls back to Index, which zeros its contribution.
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The impact price difference and premium index are:
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```text theme={null}
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IPD = max(bid_impact - Index, 0) - max(Index - ask_impact, 0)
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PremiumIndex = IPD / Index
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```
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A positive premium means the perpetual is trading rich versus Index. A negative
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premium means it is trading cheap.
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### Funding Rate
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At the end of each charge window, premium samples are averaged, passed through the
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8-hour funding formula, divided by 8 to get an hourly rate, and capped.
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```text theme={null}
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mean_P = average of PremiumIndex samples over the window
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scale = 1.0 for crypto markets; 0.5 otherwise
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F_8h = scale * (mean_P + clamp(0.0001 - mean_P, +/-0.0005))
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FR_hour = clamp(F_8h / 8, +/-0.04)
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```
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* The 0.01% term is a fixed interest leg per 8 hours.
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* The +/-0.05% clamp bounds the interest-versus-premium adjustment.
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* Crypto markets use a 1.0 scale.
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* Non-crypto markets use a 0.5 scale.
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* The 4% per hour cap prevents extreme funding during sustained dislocation.
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### Payment
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At the end of each charge window, every open position in the market settles a
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funding payment proportional to position size and the hourly rate.
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| Condition | Longs | Shorts |
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| ------------------------------------- | ------- | ------- |
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| Hourly rate > 0, perp rich vs Index | Pay | Receive |
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| Hourly rate \< 0, perp cheap vs Index | Receive | Pay |
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Funding is a direct transfer between longs and shorts. The protocol takes no cut.
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Settlement credits or debits the quote balance, and realized funding is tracked
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separately from trading PnL.
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### Interval
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The charge window is 1 hour. Samples are averaged over the hour, and the hourly
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rate is applied once at the end.
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Between settlements, rolling premium samples and implied rates are published so
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traders can see funding pressure build in real time.
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## Parameters
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| Parameter | Default | Description |
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| ---------------- | ------------------------- | ----------------------------------------- |
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| Sample interval | 5 seconds | Cadence of premium index samples |
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| Impact notional | 1,000 quote notional | Quote notional used for impact VWAP |
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| Interest leg | 0.01% per 8 hours | Fixed component in the 8-hour formula |
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| Interest clamp | +/-0.05% | Symmetric clamp on interest minus premium |
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| Funding scale | 1.0 crypto; 0.5 otherwise | Multiplier applied to the 8-hour formula |
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| Charge window | 1 hour | Interval between funding settlements |
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| Funding rate cap | 4% per hour | Maximum absolute hourly funding rate |
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