Last traded price
The last price is the price of the most recent completed trade on a particular market. A single trade can temporarily occur away from broader market prices.
Index price
An index price is generally constructed from prices across one or more underlying spot markets according to the venue's methodology.
Mark price
The mark price is a fair-price reference derived according to the derivatives venue's methodology. It can incorporate the index and additional basis or funding-related components.
Why mark price matters
Using a reference price can reduce the chance that one unusual trade immediately determines liquidation. On many venues, mark price is used for unrealized P&L and/or liquidation calculations.
Do not assume every exchange uses the same formula
Index composition, weighting, smoothing and mark-price formulas are exchange-specific and can change.
When calculating liquidation or interpreting displayed P&L, use the venue's current mark/index methodology rather than assuming another exchange's formula applies.
Why three prices can exist at the same time
The last price is the price of the most recent contract execution. An index price is generally constructed from underlying reference markets according to the venue's methodology.
The mark price is a calculated reference used by many derivatives venues for unrealized P&L and liquidation-related calculations. It is intended to reduce the effect that a brief abnormal trade in the contract's last price could have on the risk system.
Index construction is venue-specific
An exchange may combine several constituent spot markets and apply weighting, filtering or fallback rules when building an index.
Those constituents and methodologies can change, so traders should consult current contract documentation rather than assume every BTC or ETH index is constructed identically.
Know which price controls each action
During fast markets, last price, index price and mark price can temporarily differ. A chart may emphasize last price while the liquidation engine references mark price.
Order triggers may also allow different reference prices depending on the venue and order configuration.
Check the exchange documentation for the price used for liquidation, unrealized P&L and conditional-order triggers.
Key takeaways
- Last price is the most recent trade.
- Index price is a constructed underlying-market reference.
- Mark price is a derivatives reference calculated using venue-specific methodology.
- Many venues use mark price for liquidation-related calculations.
Sources & further reading
This lesson is educational material. Market structure, exchange rules, fees, margin requirements and derivatives mechanics can differ by venue and can change over time. Verify current rules with the venue you use.