Funding Curve

Funding rate is determined by PID mechanism.

There may be a positive or negative funding fee applied to a position when it is open. The fee is dynamically adjusted based on the market skew, incentivizing participants to either enter new positions or adjust their existing ones to reduce the imbalance. This mechanism ensures that the market remains efficient and that makers are fairly compensated for balancing the market.

At each market update, Perennial recalculates the funding rate based on the current market skew and a risk parameter (denoted as 'k').

$$\text{skew} = \frac{\text{long} - \text{short}}{\max(\text{long}, \text{short})}$$

This rate of change continues to adjust linearly between market updates.

$$\text{rate of change in funding} = \frac{\text{skew}}{k}$$

If there's a noticeable skew, the funding rate is adjusted at each oracle update. The greater the skew, the larger the adjustment in the funding rate per update.

info

The funding fee can be viewed on the interface by hovering over your position's P&L.