ABX index

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DEFINITION of 'ABX index'

A financial benchmark that measures the overall value of mortgages made to borrowers with subprime or weak credit. The ABX index uses credit default swap contracts to come up with an overall value and is made up of 20 bonds that is comprised of groups of subprime mortgages. Using this index, financial institutions are able to determine if the market for these securities are improving or worsening. Also referred to as Asset-Backed Securities Index.

BREAKING DOWN 'ABX index'

For example, if the ADX Index increases, this means there is less risk with subprime mortgages and vice versa. It was created by Markit and is useful for investors interested in subprime mortgages. Subprime mortgages being mortgages given to customers with faulty or weak credit.

RELATED TERMS
  1. Contingent Credit Default Swap ...

    A variation on the credit default swap (CDS). In a simple CDS, ...
  2. Asset Backed Credit Default Swap ...

    A redit default swap wherein the reference asset is an asset-backed ...
  3. Subprime Mortgage

    A type of mortgage that is normally made out to borrowers with ...
  4. Asset-Backed Security - ABS

    A financial security backed by a loan, lease or receivables against ...
  5. Credit Default Swap - CDS

    A swap designed to transfer the credit exposure of fixed income ...
  6. Benchmark

    A standard against which the performance of a security, mutual ...
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RELATED FAQS
  1. How did the ABX index behave during the 2008 subprime mortgage crisis?

    Markit Group Ltd. created the ABX index as a synthetic basket of goods designed to provide feedback on the subprime mortgage ... Read Full Answer >>
  2. How do traders use the ABX index?

    In January 2006, the financial services company Markit Group Ltd. created the absolute breadth index (ABX) to measure the ... Read Full Answer >>
  3. How are double exponential moving averages applied in technical analysis?

    Double exponential moving averages (DEMAS) are commonly used in technical analysis like any other moving average indicator ... Read Full Answer >>
  4. What are the alert zones in a Fibonacci retracement?

    The most commonly used Fibonacci retracement alert levels are at 38.2% and 61.8%. A 50% retracement level is also commonly ... Read Full Answer >>
  5. How was the Fibonacci retracement developed for use in finance?

    The use of Fibonacci retracements in stock trading was popularized by noted technical analysts W.D. Gann and R.N. Elliott. ... Read Full Answer >>
  6. How reliable is the Fibonacci retracement in predicting stock behavior?

    The use of the Fibonacci retracement is subjective. There is no objective method to verify one application of the Fibonacci ... Read Full Answer >>

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