What is an index price?
An index price is an asset reference calculated using specified price sources and rules, usually combining several spot markets. In crypto contract trading, it provides a spot reference for the underlying asset rather than using just the latest trade in a contract market. A spot market directly trades the asset itself.
Why do contracts need a spot reference?
Contracts have their own quotes and execution prices, but their value is linked to an underlying asset. For example, the last traded price of a bitcoin (BTC) contract comes from that contract market, whereas the BTC index reflects BTC prices in selected spot markets.
Combining sources can reduce the impact of brief anomalies in one market. Platforms use this as a price basis for valuation and settlement; an index is not a guaranteed accurate “true price,” and still depends on selected data and processing rules.
How is an index price calculated?
The basic process collects specified market prices, handles invalid or abnormal data, and aggregates sources according to their weights. A weight indicates how much a source contributes; a higher weight gives its price changes greater influence.
Consider three hypothetical spot markets trading the same asset in USDT with valid data. USDT is the quote asset; these figures are not real market prices or actual platform weights.
| Price source | Price (USDT) | Weight |
|---|---|---|
| Market A | 100 | 50% |
| Market B | 101 | 30% |
| Market C | 99 | 20% |
Index price = 100 × 50% + 101 × 30% + 99 × 20% = 100.1 USDT.
This is not a simple average of the three prices: they contribute at 50%, 30% and 20%. Actual products must also define sampling times, eligible sources and anomaly handling.
If a market’s quote remains stale or deviates significantly from others, rules can exclude invalid data, limit an outlier’s influence or activate a fallback method. For example, OKX spot index rules use preset weights with three or more valid sources, equal weights with two, and the sole source’s price when only one remains.
Multiple sources therefore do not mean that the same number of markets participates at every moment. Fewer sources or simultaneous anomalies can weaken the index’s ability to reflect the market.
How do index, last traded and mark prices differ?
The last traded price describes the contract’s most recent execution; the index gives a spot reference; the mark values contract positions and assesses risk.
A mark price usually builds on the index and adds contract market information under defined rules. It can calculate unrealized profit and loss—results on positions not yet closed—and support liquidation checks, which determine whether insufficient collateral requires the platform to reduce or close positions. These three prices have different sources and purposes and need not always match.
| Price | Main source | Question answered |
|---|---|---|
| Last traded price | Latest execution in the contract market | At what price did the contract just trade? |
| Index price | Specified spot markets and calculation rules | What is the underlying asset’s spot reference? |
| Mark price | Usually calculated using index and contract information | What price estimates position results and risk? |
The index itself is not an executable quote. Trades must still match orders in the relevant market; an index of 100.1 does not guarantee buying or selling at 100.1.
Where is the index used?
The index commonly provides a basis for other calculations rather than directly determining every execution price.
- Position valuation: as a basis for the mark, and hence contract results and risk assessment.
- Perpetual funding: to measure contract deviations from spot as an input into the funding rate mechanism; the calculation is not merely subtraction.
- Expiry settlement: some contracts use the index or its average over a period, depending on product rules. See expiry futures for settlement methods.
Why can indexes differ across platforms?
Platforms can choose different sources, weights, update frequencies and anomaly rules, so indexes for the same asset can differ. Comparisons also require matching quote units: BTC/USDT and BTC/USD are not the same quotation basis.
Understanding an index means checking its sources, aggregation and treatment of abnormal data, not simply whether it happens to equal another platform’s index.
Related terms
Explore mark prices, perpetual contracts and funding rates, or return to the crypto glossary.
References
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