A credit default swap index (CDX) is a credit derivative used to manage risk and speculate on the creditworthiness of a group of companies. It is a credit default swap on a basket of credit default swaps, and is traded on the Chicago Mercantile Exchange (CME).
A CDX contract is a credit derivative where the buyer pays a premium to the seller, and in exchange, the seller agrees to make periodic payments to the buyer if any of the companies in the underlying basket default on their debt obligations. If none of the companies default, the buyer will not receive any payments.
The size of the payments will depend on the size of the default, and the CDX contract will specify the recovery rate – the percentage of the defaulted debt that will be paid out by the seller.
The underlying basket of companies is typically composed of investment-grade companies, but can also include high-yield companies. The basket is typically rebalanced every six months.
CDX contracts are used by investors to speculate on the creditworthiness of the underlying companies, and to hedge against credit risk.
What is credit default swap option?
A credit default swap option is a contract that gives the holder the right, but not the obligation, to enter into a credit default swap agreement. The credit default swap agreement is a financial contract that provides protection against the risk of default on a debt instrument, typically a bond. The option to enter into a credit default swap agreement is useful for investors who want to hedge their exposure to the risk of default, but do not want to enter into a credit default swap agreement immediately.
What is a CDX Series?
A CDX Series is an options trading contract that is based on the value of a specific underlying index. The underlying index for a CDX Series contract is typically the CBOE Volatility Index (VIX), which is a measure of market volatility.
CDX Series contracts are traded on the CBOE Futures Exchange (CFE), and are settled in cash. Each contract represents a certain amount of exposure to the underlying index, and the contract price is based on the value of the underlying index at the time of purchase.
CDX Series contracts are typically used by investors as a way to hedge against market volatility, or to speculate on future market movements.
What is a swap option? A swap option is an agreement between two parties to exchange one asset for another at a specified date in the future. The assets can be anything of value, including financial instruments, commodities, or property. Swap options are often used to hedge against risk or to speculate on the future price of an asset.
How is CDS calculated?
CDS stands for credit default swap. A credit default swap is a financial derivative that allows the buyer of the swap to receive a payment if a credit event, such as a default or restructuring, occurs. The payment is made by the seller of the swap.
The payment is calculated by reference to a notional amount, which is the amount of money that would be owed if the borrower defaults. The notional amount is not paid if there is no default.
The credit default swap market is used to trade credit risk. It is the market for insurance against default. The market is also used to speculate on the probability of default.
The price of a credit default swap is the annual premium that the buyer pays to the seller. The premium is paid in advance and is usually quoted as a percentage of the notional amount.
The credit default swap market is unregulated and is not transparent. The prices of credit default swaps are not publicly available. Is there a CDX ETF? The answer to this question is yes, there is an ETF that tracks the CDX index. The ticker for this ETF is CDXC.