Understanding how to convert funding rates to Annual Percentage Rate (APR) helps you compare opportunities and estimate potential returns from funding rate arbitrage.
The Basic Formula
APR calculation depends on the funding interval:
Where periods per year depends on funding interval
Funding Intervals
Funding intervals vary by exchange and by market. Common intervals include:
- 1 hour: 24 periods/day → 8,760 periods/year
- 4 hours: 6 periods/day → 2,190 periods/year
- 8 hours: 3 periods/day → 1,095 periods/year
💡 JiaDX automatically detects and displays the correct interval for each market.
Calculation Examples
📊 Example 1: Hyperliquid (1-hour funding)
Funding rate: 0.005% per hour
Calculation: 0.005% × 24 × 365 = 0.005% × 8,760
APR: 43.8%
📊 Example 2: Aster (8-hour funding)
Funding rate: 0.01% per 8 hours
Calculation: 0.01% × 3 × 365 = 0.01% × 1,095
APR: 10.95%
Comparing Different Intervals
To compare rates across exchanges with different intervals, convert to the same timeframe:
💡 Quick Conversion
8h rate to 1h rate: Divide by 8
1h rate to 8h rate: Multiply by 8
Example: 0.01% per 8h = 0.00125% per hour
Net APR for Arbitrage
For delta-neutral arbitrage, calculate the net APR:
📊 Arbitrage Example
Exchange A (short): Receive +0.01% per 8h
Exchange B (long): Pay -0.005% per 8h
Net per period: 0.01% - 0.005% = 0.005%
Net APR: 0.005% × 1,095 = 5.475%
Accounting for Fees
Don't forget to subtract trading fees from your APR calculation:
- Opening fees: Taker/maker fees on both exchanges
- Closing fees: Same fees when exiting
- Slippage: Price impact on entry/exit
Key Takeaways
- Always convert to the same time period when comparing rates
- Hourly funding compounds faster but shows smaller individual rates
- Net APR = what you actually earn after hedging
- Factor in fees for realistic return estimates
- Past rates don't guarantee future returns
