Funding rate research: reconcile payments and hedges

Explain funding forecast errors, reconstruct changed settlement schedules, attribute OI-weighted rates and calculate borrowing and hedge-exit scenarios.

Course outline

1. 1

   Funding forecast vs payment: explain the rate and exposure gap

   A 30 USDT funding estimate became a 12 USDT receipt. Separate the rate change from the exposure change and reconcile the account's actual funding entry.

   9 min

   In short: A funding payment differs from its forecast when the settled rate, the eligible notional or both change. With s = +1 for a short and −1 for a long, rate effect = s × N0 × (r1 − r0) and exposure effect = s × (N1 − N0) × r1; they sum to the gap.

2. 2

   Funding interval changes: rebuild the actual settlement ledger

   Reconstruct a holding window across an 8-hour-to-hourly funding change. Match effective schedules, eligible positions, settled rates and posted payments.

   8 min

   In short: After a switch from eight-hour to hourly funding, list each settlement timestamp under the schedule version in force, attach the eligible notional and settled rate, and sum the signed payments. Multiplying the entry-time rate by the old settlement count misses events; applying today's interval to past windows invents them.

3. 3

   OI-weighted funding: separate rate changes from changing weights

   Both venue rates fell, yet the OI-weighted index rose 1.4 basis points. Separate the rate effect from the weight effect on a consistent venue panel.

   9 min

   In short: An OI-weighted funding index R = Σ(w × r) can rise while every venue's rate falls if weight shifts to higher-rate venues. Split R1 − R0 into a rate effect, Σ[w0 × (r1 − r0)], and a weight effect, Σ[(w1 − w0) × r1]: −1.0 + 2.4 = +1.4 basis points.

4. 4

   Funding minus borrow costs: account for rate resets and repayment

   Calculate net carry from actual funding and a changing loan balance. Include hourly rate resets, partial repayment and interest after the trade closes.

   9 min

   In short: Net carry = funding received − funding paid − loan interest, in one currency and window. Charge interest per billing period on the actual interest-bearing balance at that period's rate, and keep the loan ledger open until repayment is confirmed, not until the trade closes. Repaid principal is not an expense.

5. 5

   Funding turns negative: compare holding a hedge with closing it

   A negative funding rate does not decide the exit alone. Compare holding and closing a spot–perp hedge from the decision time, ignoring funding already earned.

   10 min

   In short: Compare holding and closing from the decision time, excluding funding already received because both branches keep it. Waiting yields current basis − exit basis + signed future funding − borrowing − exit costs; in the example, basis must narrow from 120 to 92 just to tie closing now.

Open full-size diagram

1. Funding forecast vs payment: explain the rate and exposure gap
2. Funding interval changes: rebuild the actual settlement ledger
3. OI-weighted funding: separate rate changes from changing weights
4. Funding minus borrow costs: account for rate resets and repayment
5. Funding turns negative: compare holding a hedge with closing it

Educational material. Examples do not establish a profitable strategy. Trading costs, gaps and liquidation can produce losses beyond a planned stop.