**Index price** is derived from the estimated index price *.ECOIN*(BTC,ETH,XRP,EOS). We will use BTC as an example for the explanation below.

*.EBTC* is the sum of the weighted average BTC spot trading prices from the following exchanges, **Bitstamp**, **Coinbase Pro**, **Kraken, Gemini **and **Bittrex **. The weighted average (Trade_Wt) being the average monthly trade volume of each platform.

As .*EBTC* may be an inaccurate representation should any one of the 5 exchange’s spot price deviate significantly from the other 4. Bybit will factor in the price spread between each exchange and *.EBTC* to calculate the **Index Price**. The exchange with the largest price spread from *.EBTC* will hold the least significant weightage on the **Index** **Price**.

$$ \text{Trade Wt_A} = {{ \text{Av. Monthly Trade Vol. (A)}} \over {{\text{Av. Monthly Trade Vol. (A)}} + { \text{Av. Monthly Trade Vol. (B)} }+ { \text{Av. Monthly Trade Vol. (C)}}}} $$

$$\text{.EBTC} = {\text{Trade Wt_A } \times \text{Spot Price_A} + \text{Trade Wt_B } \times \text{Spot Price_B} + \text{Trade Wt_C } \times \text{Spot Price_C}}$$

$$\text{Price Spread} = {\text{|Exchange's Spot Price} - .EBTC|}$$

An inverse square of an exchange’s price spread shall be used as the adjusted weight of the exchange.

$$ \text{Weight of Exchange (A)} = {{1 \over \text{Price Spread(A)}^2} \over {{1 \over \text{Price Spread(A)}^2} + {1 \over \text{Price Spread(B)}^2 }+ {1 \over \text{Price Spread(C)}^2}}} $$

The **Index Price **shall then be derived from the sum of the *Spot Price* for each exchange multiplied by the respective *Weight of Exchange (W_T)*.$$\text{Index Price} = ({\text{Exc A} \times\text{W_A)}}) + ({\text{Exc B} \times\text{W_B}}) + ({\text{Exc C} \times\text{W_C}})$$

Bybit will only temporarily exclude an exchange from the index calculation when the following conditions are triggered:

1. The latest spot price obtained from an exchange has not changed for more than a minute. This is to remove the exchanges that are suffering from liquidity issues or are experiencing service disruption.

2. The spot price obtained from an exchange deviates from the average price of the spot prices of the other 4 exchanges by more than 3%. This is to eliminate the occurence of any price abnormality.

Example**:**

**1. When Exchange's BTC prices are relatively close:**

$$\text{Exchange A Spot: } = {$10,048.00}$$$$\text{Exchange B Spot: } = {$10,046.00}$$$$\text{Exchange C Spot: } = {$10,056.00}$$ $$\text{.EBTC} = {1\over3} \times {$10,048.00} + {1\over3} \times {$10,046.00} + {1\over3} \times {$10,056.00} = {$10,050.00}$$$$\text{Price Spread of A} = {|{$10,048.00} - {$10,050.00}|} = $2.00 $$$$\text{Price Spread of B} = {|{$10,046.00} - {$10,050.00}|} = $4.00 $$$$\text{Price Spread of C} = {|{$10,056.00} - {$10,050.00}|} = $6.00 $$

$$ \text{Calculated A Weightage} = {{1 \over {$2.00}^2} \over {{1 \over {$2.00}^2} + {1 \over {$4.00}^2 }+ {1 \over {$6.00}^2}}} = 0.7346938775510203 $$$$ \text{Calculated B Weightage} = {{1 \over {$4.00}^2} \over {{1 \over {$2.00}^2} + {1 \over {$4.00}^2 }+ {1 \over {$6.00}^2}}} = 0.18367346938775508 $$$$ \text{Calculated C Weightage} = {{1 \over {$6.00}^2} \over {{1 \over {$2.00}^2} + {1 \over {$4.00}^2 }+ {1 \over {$6.00}^2}}} = 0.08163265306122448 $$

Hence, .BTCUSD **Index Price **will be the following:

$$\text{Index Price} = \text{Calc A Weightage} \times {$10,048.00} + \text{Calc B Weightage} \times {$10,046.00} + \text{Calc C Weightage} \times {$10,056.00} \approx {$10,048.29}$$

**2. When one Exchange's BTC price differs from the other two Exchange:**

$$\text{Exchange A Spot: } = {$10,060.00}$$$$\text{Exchange B Spot: } = {$10,040.00}$$$$\text{Exchange C Spot: } = {$10,500.00}$$ $$\text{.EBTC} = {1\over3} \times {$10,060.00} + {1\over3} \times {$10,040.00} + {1\over3} \times {$10,500.00} = {$10,200.00}$$$$\text{Price Spread of A} = {|{$10,060.00} - {$10,200.00}|} = $140.00 $$$$\text{Price Spread of B} = {|{$10,040.00} - {$10,200.00}|} = $160.00 $$$$\text{Price Spread of C} = {|{$10,500.00} - {$10,200.00}|} = $300.00 $$

$$ \text{Calculated A Weightage} = {{1 \over {$140.00}^2} \over {{1 \over {$140.00}^2} + {1 \over {$160.00}^2 }+ {1 \over {$300.00}^2}}} = 0.5041840271699171 $$$$ \text{Calculated B Weightage} = {{1 \over {$160.00}^2} \over {{1 \over {$140.00}^2} + {1 \over {$160.00}^2 }+ {1 \over {$300.00}^2}}} = 0.3860158958019677 $$$$ \text{Calculated C Weightage} = {{1 \over {$300.00}^2} \over {{1 \over {$140.00}^2} + {1 \over {$160.00}^2 }+ {1 \over {$300.00}^2}}} = 0.10980007702811527 $$

Hence, .BTCUSD **Index Price **will be the following:

$$\text{Index Price} = \text{Calc A Weightage} \times {$10,060.00} + \text{Calc B Weightage} \times {$10,040.00} + \text{Calc C Weightage} \times {$10,500.00} \approx {$10,100.59}$$

As shown in **Example 2**, when one of the exchange’s spot is significantly different from the others, as compared to the *.EBTC*, the adjusted weight **Index Price** is a better indicator for unrealized profits and losses.