A perpetual position is marked to two different numbers at once: the last traded or order-book price on the venue itself, and a separate, sturdier reference used to calculate unrealized profit and loss and to decide whether a position gets liquidated. Keeping those numbers apart, instead of using raw trade price for everything, is a deliberate design choice, built that way on purpose to protect the accuracy of both figures.
The index price is built from a basket of external spot venues, typically a weighted average across several major spot exchanges, and represents the underlying asset's broader market price independent of what is happening on any single derivatives venue's own order book. Weighting several sources matters directly: if a single spot venue's price briefly diverges from the broader market, whether from a data error, an outage, or a large isolated trade, its influence on the blended index is limited. The index price is also the reference that funding calculations measure a venue's own basis against, as covered in funding mechanics in depth .
Exactly which spot venues feed into the index, and how heavily each one is weighted, is a design choice each perpetual venue publishes and can revise over time, typically favoring the exchanges that carry the deepest, most liquid spot order books for that asset. A component exchange that becomes illiquid, delists the asset, or otherwise stops being representative of the broader market is generally the kind of change that triggers a review of the index composition, since an outdated or thin component can quietly distort the blended price even while the formula itself keeps running normally.
Mark price is derived from the index price plus a smoothed measure of the venue's own basis, its own perpetual price relative to its index. Because it blends in the venue's basis gradually, often through a moving average taken over a short window, instead of jumping on every single trade, a single large order or a thin order book has a far harder time moving it enough to trigger a liquidation the broader market would not justify. This is the number used for unrealized profit and loss, and it is the number that triggers liquidation, which means two traders holding an identical position size can see slightly different unrealized profit and loss figures from their last traded price simply because mark price is doing the smoothing.
The same gap between a venue's own price and the index that mark price smooths for liquidation purposes is also, in most designs, the raw input the funding formula measures over its own settlement window. The two calculations are not identical: mark price is smoothed for immediate use in every position's profit, loss and liquidation check, while the funding premium component is typically sampled and averaged across the full interval. Even so, both start from the same underlying comparison between a venue's own price and its external index. That shared foundation is part of why funding and liquidation activity tend to move together during volatile periods.
Some venues label this same concept fair price. The terminology differs, but the purpose is identical: a manipulation-resistant reference built by blending an external index with the venue's own price, without reacting to a single trade. Whichever label a venue uses, the underlying mechanism, and the reason it exists, stays the same, and a trader moving between venues should expect the same protection under either name, treating the two as equally reliable. The naming difference is largely historical, reflecting which early exchange's documentation a given venue's team happened to model its own design on.
A thin order book can print a trade far from the broader market for a brief moment, for example if a large market order sweeps through several price levels on a venue with limited resting liquidity at that moment. Because liquidation is measured against mark price instead of that stray trade, an isolated wick on one venue rarely liquidates a well-margined position by itself. As an illustration, suppose the index price for an asset sits at $100 and a single thin trade briefly prints at $92 on one venue's own order book after a large market sell order clears an unusually empty book. Because mark price is smoothed from the index and the venue's recent basis, without resetting to that one trade, it might sit closer to $99, leaving a well-margined position untouched by a wick that would otherwise have looked like a serious adverse move. A genuine, sustained move that also shows up in the index price still flows through to mark price and can trigger liquidation as intended, which is the entire point of separating the two numbers in the first place. How that liquidation interacts with leverage chosen is covered in leverage ratios on perps .
Mark price is the reference price a venue uses to calculate unrealized profit and loss and to decide whether a position gets liquidated. It is built from the index price plus a smoothed measure of the venue's own basis, which makes it resistant to being moved by a single large order or a thin order book.
Index price is an aggregated reference price for the underlying asset, typically a weighted average taken across several external spot exchanges. It represents the broader market's price independent of activity on any single derivatives venue, and it is the anchor that both mark price and funding calculations are measured against.
Fair value price, sometimes called fair price, is the term some venues use for the same manipulation-resistant reference other venues call mark price. It is built the same way, by blending the index price with a smoothed view of the venue's own basis, and serves the same purpose in unrealized profit and loss and liquidation calculations.
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