> ## Documentation Index
> Fetch the complete documentation index at: https://docs.roxom.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Funding Rate Calculation

> Learn how the funding rate combines interest and premium/discount components, capped at plus or minus 1% per interval.

Roxom's funding rate is designed to reflect two components:

1. **Interest Rate Component:** This accounts for the cost-of-carry difference between holding the underlying asset vs holding BTC. In Roxom's case, contracts are BTC-margined, so think of it as the difference in financing rates for the two sides (asset vs BTC). By default, Roxom sets a small baseline interest rate factor of **0.01% per 8 hours** (this can be adjusted if needed for different assets or market conditions, but 0.01% is the default).
2. **Premium/Discount Component:** This is the primary driver of the funding rate. It measures the **difference between the perpetual's market price and the underlying index price**. If the perpetual is trading higher than the index (i.e. at a premium), the funding rate will be **positive** (longs will pay shorts). If the perpetual is below the index (at a discount), the funding rate will be **negative** (shorts pay longs). The magnitude of this component is essentially the percentage price discrepancy. For example, if the perp is 1% above the index, this component contributes roughly +1% (annualized to the period) to the funding rate for that interval.

Roxom imposes a **cap** on the funding rate to prevent it from going to extreme levels. By default, the funding rate per interval is capped at **±1%** per 8-hour period.

The **formula** can be summarized as:

$Funding Rate = \frac{Perpetual Price - Index Price}{Index Price} + Interest Rate Adjustment$

*(with the result constrained to not exceed +1% or go below -1% for the period, unless an instrument specifies otherwise).*