# Oracles & Pricing Methodology

## Oracles & Pricing Methodology

CASH uses two key prices for each market:

* **Oracle price**: the reference index price
* **Mark price**: the risk price used for **PnL**, **margining**, and **liquidations**

CASH perpetuals runs in two regimes: **Regular Hours** and **Off Hours**.

### Definitions

Let:

* **O(t)** = oracle price at time *t*
* **Bid(t)** = best bid
* **Ask(t)** = best ask
* **Last(t)** = last trade price (most recent print)

CASH uses:

* **EWMA₁₅₀s(x)**: 150-second exponentially-weighted moving average of a series *x*
* **EWMA₈h(x)**: 8-hour exponentially-weighted moving average of a series *x*

CASH defines two “microstructure” references:

#### Book mid

* **Mid(t) = (Bid(t) + Ask(t)) / 2**

#### Robust on-venue price (median of bid/ask/last)

* **Pₘ(t) = median( Bid(t), Ask(t), Last(t) )**

This helps reduce sensitivity to a single noisy print or a momentarily wide spread.

> Note: “Normal Hours” vs “Off Hours” are defined per market (e.g., aligned with the underlying’s primary trading session)

***

### Regular Hours

#### Oracle: external Pyth source

During Normal Hours, CASH uses an external, independent source (provided by Pyth). 

#### Mark: median of three references

During Normal Hours, mark is the **median** of:

1. **Oracle price**: O(t)
2. **Oracle + smoothed basis**: O(t) + EWMA₁₅₀s( Mid(t) − O(t) )
3. **Robust on-venue price**: Pₘ(t) = median(Bid(t), Ask(t), Last(t))

So:

* **Mark(t) = median( O(t), O(t) + EWMA₁₅₀s(Mid(t) − O(t)), Pₘ(t) )**

Intuition:

* The **EWMA basis term** allows mark to follow sustained order-book premium/discount smoothly (without overreacting to brief spikes).
* The **median(Bid,Ask,Last)** term anchors to what’s actually trading while being robust to outliers.

***

### Off Hours

Off Hours is designed to reduce sudden liquidation events when external price discovery is weaker and liquidity can be thinner.

#### Impact price difference

CASH computes an **impact price** from the order book at a predefined “impact size”. Define:

* **ImpactMid(t)** = (ImpactBid(t) + ImpactAsk(t)) / 2
* **ImpactDiff(t) = ImpactMid(t) − Pₘ(t)**

i.e., impact mid relative to a robust on-venue reference price.

#### Oracle: 8h EWMA of impact price difference

During Off Hours, oracle is constructed as:

* **O(t) = Pₘ(t) + EWMA₈h( ImpactDiff(t) )**

This makes the oracle reflect a smoothed measure of *where size trades* (impact) rather than just top-of-book. The EWMA is sampled with each oracle update (every \~3 sec). The sampling begins with the last known external oracle price.

#### Mark: equal to oracle

During Off Hours:

* **Mark(t) = O(t)**

***

### Why mark can differ from oracle

Mark is the **risk price**. It’s built to be:

* hard to manipulate with small trades,
* robust to stale/noisy inputs, and
* stable enough to avoid unnecessary liquidations.

That’s why CASH uses:

* **Pyth oracle** during Regular Hours, plus a mark that blends oracle, smoothed basis, and a robust on-venue price
* **impact-based smoothing** during Off Hours, with mark = oracle

***

### Practical implications

* **Liquidations use Mark**, not Last.
* In Normal Hours, mark adapts to sustained basis but resists transient spikes.
* In Off Hours, mark is intentionally smoother; PnL and liquidation thresholds may “move slower” than the top-of-book.
* Around Normal ↔ Off Hours transitions, expect mark dynamics to change by design.


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