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Index Price Calculation

Index Price is the execution price used for opening and closing positions. It is calculated based on Market Price and the current position imbalance in the market.

Formula​

Index Price=Market Price×(1+adjustment)\text{Index Price} = \text{Market Price} \times (1 + \text{adjustment})

where:

adjustment=clamp(skewSKEW_SCALE,−MAX_PREMIUM,MAX_PREMIUM)\text{adjustment} = \text{clamp}\left(\frac{\text{skew}}{\text{SKEW\_SCALE}}, -\text{MAX\_PREMIUM}, \text{MAX\_PREMIUM}\right)

Parameters​

ParameterValueDescription
Market PriceVariableBase real estate price from external sources
skewLong OI - Short OIPosition imbalance in USD
SKEW_SCALE10,000,000 USDScaling coefficient for smooth price changes
MAX_PREMIUM0.05 (5%)Maximum deviation of Index Price from Market Price

Explanation​

Skew​

Skew (imbalance) is calculated as the difference between the total value of long and short positions:

skew=totalLongValue−totalShortValue\text{skew} = \text{totalLongValue} - \text{totalShortValue}

where:

  • totalLongValue=∑(quantity_sqm×entry_price)\text{totalLongValue} = \sum(\text{quantity\_sqm} \times \text{entry\_price}) for all long positions
  • totalShortValue=∑(quantity_sqm×entry_price)\text{totalShortValue} = \sum(\text{quantity\_sqm} \times \text{entry\_price}) for all short positions

Adjustment​

Adjustment shows how much Index Price deviates from Market Price:

adjustment=skewSKEW_SCALE\text{adjustment} = \frac{\text{skew}}{\text{SKEW\_SCALE}}

Adjustment is limited to the range [-MAX_PREMIUM, MAX_PREMIUM], meaning Index Price cannot deviate from Market Price by more than 5%.

SKEW_SCALE​

SKEW_SCALE is chosen such that the change in Index Price for a 100purchaseislessthan100 purchase is less than 0.01:

change=indexPrice×skewSKEW_SCALE\text{change} = \text{indexPrice} \times \frac{\text{skew}}{\text{SKEW\_SCALE}}

With indexPrice≈334,511\text{indexPrice} \approx 334{,}511, skew=100\text{skew} = 100, change<0.01\text{change} < 0.01:

SKEW_SCALE>334,511×1000.01=3,345,110,000\text{SKEW\_SCALE} > \frac{334{,}511 \times 100}{0.01} = 3{,}345{,}110{,}000

A more conservative value of 10,000,00010{,}000{,}000 is used to ensure smooth price changes.

Calculation Examples​

Example 1: Balanced market​

Conditions:

  • Market Price = $300,000
  • Long OI = $5,000,000
  • Short OI = $5,000,000

Calculation:

skew = $5,000,000 - $5,000,000 = $0
adjustment = $0 / $10,000,000 = 0
Index Price = $300,000 × (1 + 0) = $300,000

Example 2: Long position dominance​

Conditions:

  • Market Price = $300,000
  • Long OI = $8,000,000
  • Short OI = $3,000,000

Calculation:

skew = $8,000,000 - $3,000,000 = $5,000,000
adjustment = $5,000,000 / $10,000,000 = 0.5
clamped_adjustment = min(0.5, 0.05) = 0.05
Index Price = $300,000 × (1 + 0.05) = $315,000

Example 3: Short position dominance​

Conditions:

  • Market Price = $300,000
  • Long OI = $2,000,000
  • Short OI = $7,000,000

Calculation:

skew = $2,000,000 - $7,000,000 = -$5,000,000
adjustment = -$5,000,000 / $10,000,000 = -0.5
clamped_adjustment = max(-0.5, -0.05) = -0.05
Index Price = $300,000 × (1 - 0.05) = $285,000

Update​

Index Price is automatically updated when:

  • Opening a new position
  • Closing an existing position
  • Periodic update (daily)