Credit Derivatives: Trading, Investing and Risk Management, Second Edition

Appendix

Markit Credit and Loan Indices

The following is a description of the main credit indices as of July 2009 and is quoted with permission from Markit Group Limited’s material.

Credit and Loan Indices - Markit CDX, Markit iTraxx, Markit LCDX, Markit iTraxx LevX, Markit iTraxx SovX and Markit MCDX - provide the market standards for investing, trading and hedging in the credit markets (Figure A.1).

PRODUCT DESCRIPTIONS

Markit iTraxx

Markit iTraxx indices are the standard European and Asian tradeable credit default swap family of indices. The rules-based Markit iTraxx indices comprise the most liquid names in the European and Asian markets. The selection methodology ensures that the indices are replicable and represent the most liquid, traded part of the market. Markit iTraxx indices are easy and efficient to trade - investors can express their bullish or bearish sentiments on credit as an asset class, and portfolio managers can manage their credit exposures actively.

The benchmark Markit iTraxx Europe index comprises 125 equally-weighted European names. A Markit iTraxx HiVol index consisting of the 30 widest spread non-financial names and three sector indices are also published. The Markit iTraxx Crossover index comprises the 50 most liquid sub-investment grade entities.

The Markit iTraxx Europe indices trade 3-, 5-, 7- and 10-year maturities and a new series is determined by dealer liquidity poll every 6 months. In its role as calculation agent, Markit calculates the ...