CDS Index

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A credit default swap index (CDS index) is a credit derivative used to hedge credit risk or to take a position on a basket of credit entities or indices; they are a portfolio of actively traded liquid names in a particular sector of the market.

Unlike a credit default swap, which is an over-the-counter credit derivative, a credit default swap index is standardized, meaning that they are highly liquid and trade at a small bid-offer spread. This makes CDS indicies a primary market vehicle for gaining diversified credit exposure.[1]

There are two main families of index:

References

  1. CDS index description. SuperDerivatives.
  2. Markit CDX Product summary. Markit.