NDWI1 - Normalized Difference Water Index 1

The Normalized Difference Water Index (NDWI) (Gao, 1996) is a satellite-derived index from the Near-Infrared (NIR) and Short Wave Infrared (SWIR) channels. The SWIR reflectance reflects changes in both the vegetation water content and the spongy mesophyll structure in vegetation canopies, while the NIR reflectance is affected by leaf internal structure and leaf dry matter content but not by water content. The combination of the NIR with the SWIR removes variations induced by leaf internal structure and leaf dry matter content, improving the accuracy in retrieving the vegetation water content (Ceccato et al. 2001). The amount of water available in the internal leaf structure largely controls the spectral reflectance in the SWIR interval of the electromagnetic spectrum. SWIR reflectance is therefore negatively related to leaf water content (Tucker 1980). Its usefulness for drought monitoring and early warning has been demonstrated in different studies (e.g., Gu et al., 2007; Ceccato et al., 2002). It is computed using the near infrared (NIR) and the short wave infrared (SWIR) reflectance (Eq.1), which makes it sensitive to changes in liquid water content and in spongy mesophyll of vegetation canopies (Gao, 1996 ; Ceccato et al., 2001).

One is used to monitor changes in water content of leaves, using near-infrared (NIR) and short-wave infrared (SWIR) wavelengths, proposed by Gao in 1996:[1] 

Generic formula:

Sentinel 2 Bands formula:

Interpretation

Visual or digital interpretation of the output image/raster created is similar to NDVI:

• -1 to 0 - Bright surface with no vegetation or water content

• +1 - represent water content

For the second variant of the NDWI, another threshold can also be found in  McFeeters(1996) that avoids creating false alarms in urban areas:

• < 0.3 - Non-water

• >= 0.3 - Water.

Gao, Bo-Cai (1996). "NDWI—A normalized difference water index for remote sensing of vegetation liquid water from space" (PDF). Remote Sensing of Environment. 58 (3): 257–266. Bibcode:1996RSEnv..58..257G. doi:10.1016/S0034-4257(96)00067-3
S. K. McFEETERS (1996) The use of the Normalized Difference Water Index (NDWI) in the delineation of open water features, International Journal of Remote Sensing, 17:7, 1425-1432, DOI: 10.1080/01431169608948714 
Ceccato et al 2001 Remote Sensing of Environment 77 (2001) 22–33