What is APR (Annualized Funding)?
APR (annualized funding) is the per-interval funding rate scaled to a full year by multiplying it by the number of funding periods per year. It converts a small per-payment rate into a comparable yearly percentage, letting traders rank funding carry across perps with different funding intervals.
APR (Annualized Funding) turns a raw funding rate — a tiny percentage charged every funding interval — into a yearly percentage you can actually reason about. A perp might charge 0.01% every 8 hours; on its own that number is hard to judge, but annualized it becomes 10.95% APR, which you can compare directly to any other yield.
The annualization is a simple multiplication, not compounding: you multiply the per-interval rate by how many intervals occur in a year. With 8-hour funding there are 3 payments per day and 1,095 per year, so 0.01% × 1,095 = 10.95%. With 1-hour funding there are 8,760 intervals per year, so the same 0.01% per-hour rate annualizes to 87.6% — which is exactly why funding interval matters as much as the rate itself.
For funding-rate arbitrage, APR is the headline number: it estimates the yearly carry you earn (or pay) on a delta-neutral position where you hold the funding-positive side and hedge the opposite side. When you go long on a venue paying negative funding and short on a venue paying positive funding, your net APR is the difference between the two legs' annualized rates.
The critical caveat: APR is a forward projection of the current rate held constant for a year. Funding rates move every interval, so realized APR almost always differs from the quoted figure. It also ignores execution costs — taker fees and orderbook slippage on both legs can erase a thin funding spread entirely, which is why a realistic net-of-cost view (not the raw APR) determines whether an arb is actually profitable.
Annualized funding APR
periods_per_year = (365 × 24 × 3600) / interval_seconds APR = funding_rate_per_interval × periods_per_year Net APR (arb) = short_leg_APR − long_leg_APR
8h interval → 1,095 periods/yr; 1h → 8,760; 4h → 2,190. Annualization is linear (rate × periods), not compounded.
BTC perp, 0.01% funding every 8h
- •Per-interval rate: 0.01% (0.0001)
- •Periods per year: (365×24×3600)/28800 = 1,095
- •APR = 0.0001 × 1,095 = 0.1095 = 10.95%
- •
- •Arb legs on the same $50,000 BTC notional:
- •Long leg (venue A, funding −0.005%/8h): APR = −0.00005 × 1,095 = −5.48% (you receive)
- •Short leg (venue B, funding +0.02%/8h): APR = 0.0002 × 1,095 = 21.90% (you receive)
- •Net funding APR = 21.90% − (−5.48%) = 27.38% before fees & slippage
Same 0.01% rate, different funding intervals
| Funding interval | Periods / year | APR from 0.01% per interval |
|---|---|---|
| 1 hour | 8,760 | 87.60% |
| 4 hours | 2,190 | 21.90% |
| 8 hours | 1,095 | 10.95% |
FAQ
How is funding APR calculated?
Multiply the per-interval funding rate by the number of intervals in a year. For 8-hour funding there are 1,095 intervals per year, so 0.01% per interval equals 0.01% × 1,095 = 10.95% APR. It is a linear projection, not compounded.
Why does funding interval change the APR so much?
APR scales with how often funding is charged. The same 0.01% rate annualizes to 10.95% at 8-hour funding but 87.6% at 1-hour funding, because 1-hour perps charge funding 8× more often. Always confirm the interval before comparing two venues' APRs.
Is the quoted funding APR guaranteed?
No. APR assumes the current rate stays constant for a full year, but funding rates change every interval. It is a snapshot estimate — realized APR over a holding period is typically different and must be net of taker fees and slippage on both legs.
What is a good funding APR for arbitrage?
There is no fixed threshold; what matters is net APR after subtracting round-trip fees and slippage on both legs. A 10% gross spread can vanish entirely on thin orderbooks, while a stable 20%+ net spread on liquid pairs is a strong signal.
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