iTraxx
iTraxx is the name of a family of credit default indices that cover the regions of Europe and Asia . The indices are intended to representatively document the development of the corresponding credit derivative markets . The iTraxx indices are operated by the International Index Company , a 100% subsidiary of MarkIt .
iTraxx indices are quoted in basis points of the nominal value . This gives the annual costs depending on the insured nominal value for a proportional hedge of the debtors represented in the index. In addition to subdividing the iTraxx into individual sub-indices, most of these sub-indices are divided into different terms. For example, the iTraxx Europe is calculated for terms of 3, 5, 7 and 10 years.
Tradable products
- Credit Default Swaps (CDS) can also be concluded with an iTraxx as the underlying . This gives investors the opportunity to take credit risk long and short with a diversified portfolio with little effort . The relatively high standardization of the contracts for an over-the-counter transaction should lead to high liquidity and thus to low bid-ask spreads .
- Tranched CDS (comparable to a collateralized debt obligation ) can also be concluded on the iTraxx Europe. These are available in the tranches 0–3%, 3–6%, 6–9%, 9–12% and 12–22%. In this way, the investor can enter into a commitment regarding the correlation of the debtor names in the portfolio in addition to the credit risk .
- Trading in futures on the iTraxx Europe, iTraxx HiVol and iTraxx CrossOver is in principle possible at Eurex .
Roll
The companies included in the indices are updated every six months, in March and September. This is also called iTraxx-Roll ( English for rolling ). In contrast to many other indices, such as the DAX , the companies in the indices are not simply replaced, but completely new indices are created. The different versions are called series . The latest series is called on the run . For example, the iTraxx Europe Series 11 launched in March 2009 is on the run in April 2009.
It should be noted that the old series will not go away. These will continue to be calculated as the term of the iTraxx indices is significantly longer than the on the run time of six months. However, the greatest attention is always paid to the current series.
The roll determines which annual premium is to be paid as a spread for the new series over the term, provided an iTraxx CDS was traded on an index. This premium remains the same over the life of the index, even if the market moves. If a CDS is concluded on the index during its term, the counterparties pay the difference between the premium determined during the roll and the premium calculated from current market prices as a cash settlement or upfront to their counterpart.
Default of a debtor during the term
If one of the insured borrowers within an iTraxx index fails, the security will be removed from the index without replacement. If a CDS was traded on the iTraxx concerned, the default of the debtor is treated as a default on a single CDS for this debtor in the amount of the pro rata nominal of the iTraxx CDS.
Overview of the indices
| region | Type | Index name | Number of members | description | traded maturities (in years) |
|---|---|---|---|---|---|
| Europe | Benchmark indices | iTraxx Europe | 125 | The most liquid addresses for the last 6 months prior to compilation roll | 3, 5, 7, 10 |
| iTraxx Europe HiVol | 30th | Addresses with the highest prices of the iTraxx Europe | 3, 5, 7, 10 | ||
| iTraxx Europe Crossover | 50 (since series 16, previously 40) | Addresses below the investment grade | 3, 5, 7, 10 | ||
| Sector indices | iTraxx Non-Financials | 100 | Addresses outside the financial sector | 5, 10 | |
| iTraxx Senior Financials | 25th | First-rate (senior) financial risks | 5, 10 | ||
| iTraxx Sub Financials | 25th | Subordinated financial risks | 5, 10 | ||
| iTraxx TMT | 20th | Telecommunications, media and technology - now discontinued | 5, 10 | ||
| iTraxx Industrials | 20th | contains industrial addresses - now discontinued | 5, 10 | ||
| iTraxx Energy | 20th | Addresses from the energy sector - now discontinued | 5, 10 | ||
| iTraxx Consumers | 30th | Consumption-related addresses - now discontinued | 5, 10 | ||
| iTraxx cars | 10 | Addresses from the automotive sector - now discontinued | 5, 10 | ||
| Asia / Australia | Benchmark indices | iTraxx Japan | |||
| iTraxx Australia | |||||
| iTraxx Asia ex-Japan IG | |||||
| iTraxx Asia ex-Japan HY |
Web links
- IHS Markit ( Engl. )