The Normalized Difference Water Index (NDWI) is a satellite index derived from Near-Infrared (NIR) and Short Wave Infrared (SWIR) channels:
The amount of water present in leaf internal structure mainly affects the spectral reflectance in the SWIR interval (ca. 1.2-1.7 m). The SWIR reflectance is also sensitive to leaf internal structure. Because the NIR is affected by leaf internal structure and leaf dry matter, but not by the water content, the combination of both into NDWI “removes” leaf dry matter and internal structure.
NDWI is less susceptible to atmospheric scattering than NDVI, but does not remove completely the background soil reflectance effects, similar to NDVI. Because the information about vegetation canopies contained in the SWIR channel is very different from that contained in the VIS channel, NDWI should be considered as an independent vegetation index.
NDWI defined as above is also called because there are a number of alternative spectral indices for water detection:
Sometimes the NDVI is also used for water detection, though it’s primary application is the detection of vegetation.
B. C. Gao “NDWI - A normalized difference water index for remote sensing of vegetation liquid water from space” Remote Sensing of Environment 58 (1996) 257-266.