# Funding rate

The Funding Rate comprises two parts: the Interest Rate and the Premium.

The Premium is what causes the perpetual contract price to align with the underlying asset price.

The main component of the funding rate is a premium that takes into account market activity for the perpetual. It is calculated for each market, every minute (at a random point within the minute) using the formula:  

{% code overflow="wrap" %}

```
Premium (P) = (Max(0, Impact Bid Price - Index Price) - Max(0, Index Price - Impact Ask Price)) / Index Price
```

{% endcode %}

<table><thead><tr><th width="196.5"></th><th></th></tr></thead><tbody><tr><td><strong>Impact Bid Price</strong></td><td><mark style="color:yellow;">Average execution price for a market sell of the impact notional value</mark></td></tr><tr><td><strong>Impact Ask Price</strong></td><td><mark style="color:yellow;">Average execution price for a market buy of the impact notional value</mark></td></tr><tr><td><strong>Impact Notional Amount</strong></td><td><mark style="color:yellow;">500 USDC / Initial Margin Fraction</mark></td></tr></tbody></table>

### Funding payments

At the start of each hour, an account receives USDC (if F is positive) or pays USDC (if F is negative) in an amount equal to:

```
F = (-1) × S × P × R
```

* S is the size of the position (positive if long, negative if short)
* P is the oracle (index) price for the market
* R is the funding rate (as a 1-hour rate)

{% hint style="info" %}
The minimum funding rate is -0.75% and the maximum funding rate is 0.75%. There is a limit to how quickly the admin can change the funding rate, but this does not take effect during normal operation.
{% endhint %}

Funding Payment Inclusion - Subject to funding if you hold position at payment interval