What Is the “Index Price” and How Is It Used in the Funding Rate Calculation?

The index price is a fair, aggregated price of the underlying asset, typically calculated as the median price from a basket of major, highly liquid spot exchanges. It is designed to prevent price manipulation on a single exchange.

In the funding rate calculation, the index price is used as the anchor point against which the perpetual contract's mark price is compared. The difference between the mark price and the index price determines the direction and magnitude of the funding rate payment.