What is CDX Investment Grade?
The Credit Default Swap Index (CDX) is a benchmark index that tracks a basket of U.S. and emerging market single-issuer credit default swaps. Credit default swaps act like insurance policies in the financial world, offering a buyer protection in the case of a borrower’s default.
What is Markit CDX?
Markit’s North American High Yield CDX Index, or the CDX. NA. HY Index (the “HY Index”), is composed of one hundred (100) liquid North American entities with high yield credit ratings that trade in the CDS market.
Can you clear single name CDS?
Self-referencing Single Name CDS transactions are not permitted to be cleared.
How is CDX HY quoted?
High Yield CDX Index Swaps are quoted on price. An agreement to buy or sell protection on a basket of liquid North America based entities with a high yield credit rating. Underlying securities are designated by MarkIT and listed under the Index Name of CDX.
What is CDS single name?
• single name credit default swap is a contract that. provides protection against a default event on the. part of a single issuer (“name”) ✓ protection buyer pays premium and, in event of ‘credit. event’, receives par in exchange for eligible obligation.
What is CDS recovery rate?
When a bond defaults, the buyer of the CDS is entitled to the notional principal minus the recovery rate of the bond. The recovery rate of the bond is considered its value immediately after default. So if the recovery rate on $1,000,000 worth of bonds is 75%, then the CDS payoff = $1,000,000 × (1 – . 75) = $250,000.
How do you read CDS spreads?
The spread of a CDS indicates the price investors have to pay to insure against the company’s default. If the spread on a Bank of America CDS is 80 basis points, then an investor pays $80,000 a year to buy protection on $10 million worth of the company’s debt.
Are CDS cash settled?
When a credit event occurs, settlement of the CDS contract can be either physical or in cash. In the past, credit events were settled via physical settlement. This means buyers of protection actually delivered a bond to the seller of protection for par.
What is the maturity date of a CDX contract?
Markit CDX.NA.IG. Each index series with a Roll Date of September 20 shall have a maturity date of December 20 (or the first Business Day thereafter if December 20 is not a Business Day) occurring up to 10 years following the Roll Date. Variable by contract type and price. See Error Trade Policy for more details.
What is the maturity date of the IG Index Sub-Index?
Each IG Index sub-index that has a Roll Date of September 20 shall be issued with the maturity date of December 20 occurring 5 years following the Roll Date. Each IG Index sub-index that has a Roll Date of March 20 shall be issued with the maturity date of June 20 occurring 5 years following the Roll Date. Author WEBBE Created Date
What is the North American investment grade CDX index?
Markit’s North American Investment Grade CDX Index, or the CDX.NA.IG Index (the “IG Index”), is composed of one hundred twenty five (125) of the most liquid North American entities with investment grade credit ratings that trade in the CDS market.
What is the CDX index and how does it work?
But the CDX index also functions as a shell, or container, as it is made up of a collection of other credit derivatives—credit default swaps (CDS). Currently, the CDX contains 125 issuers and is broken down by different types of credits: investment grade, high yield, high volatility, crossover, and emerging markets.