An index derivative whose performance is based on or tied to an underlying benchmark equity index. In other words, the underlying asset of such a derivative is an equity index rather than individual equity securities or indexed assets or an ad-hoc collection thereof. An equity index derivative is written on equity market indexes, which are not traded directly on the market, but whose collective performance can be traded, capitalizing on the differences between market entry and exit points.

The investor (holder of an equity index derivative) can trade in the index stocks without having to trade each underlying security/ asset in that a group of stocks or the market. Equity index derivative contracts are predominantly cash-settled.

Equity index derivatives include equity index options, equity index futures, etc.