Billance adopts mark price to avoid unnecessary liquidations, forming apart of its highly leveraged products. Without this relatively sophisticated system, when the market is either being manipulated or its actually illiquid, the mark price may swing unnecessarily in relation to its index price, leading to, in many cases, an unnecessary liquidation.
Mark price is adopted for situations where there is either an unrealized PNL, liquidations, as well, an ADL.
NB: When you open a position, you may see a positive or negative unrealized PNL immediately, this usually happens when the fair price is usually different from the actual fill price. This is in reality quite normal and does not mean you have lost the said asset, but in actual fact this prompts you to be sure that you pay attention to your Liquidation Price to avoid a premature liquidation.
Calculation of the Mark Price
The fair price of the perpetual contract is calculated based on the funding basis:
Funding Basis = Funding Rate* (Time to Next Funding Payment / Time Interval of Funding)
Mark Price = Index Price* (1 + Funding Basis)