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What Is the Purpose of the ‘Premium Index’ in the Funding Rate Calculation?

Measures the difference between the contract price and the Index Price; drives the rate to push the contract price toward spot.
Greeks.Live22.11.25

What Is the Purpose of the ‘Premium Index’ in the Funding Rate Calculation?

The Premium Index is the core component that drives the funding rate. It measures the difference between the perpetual contract's Mark Price and the underlying asset's Index Price.

If the Premium Index is positive, it means the contract is trading at a premium to the spot price, indicating high demand for long positions. This positive index leads to long traders paying short traders to push the contract price back down.

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