ABX index

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. Benchmark

    A standard against which the performance of a security, mutual ...
  2. Credit Default Swap - CDS

    A particular type of swap designed to transfer the credit exposure ...
  3. Contingent Credit Default Swap ...

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

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

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

    A financial security backed by a loan, lease or receivables against ...
Related Articles
  1. Investing Basics

    An Introduction To Stock Market Indexes

    Investopedia explains the five most talked about indexes and what makes them all different.
  2. Active Trading

    Introduction To The Arms Index

    Developed in 1967 by Richard Arms, this volume-based breadth indicator can be applied over various time periods.
  3. Active Trading

    Accumulative Swing Index And The McClellan Oscillator

    These indicators serve as confirmation for those of us who need to double check our findings on a regular basis.
  4. Insurance

    Investing In Securitized Products

    Securitized assets are customizable and have a wide range of yields, making them an attractive asset class.
  5. Active Trading

    An Introduction To The Relative Strength Index

    Learn the difference between relative strength and the relative strength index, a frequently used technical analysis oscillator.
  6. Forex Education

    Finding Market Movement With The ADX

    Take a closer look at this indicator, which refines your insight into the strength of a prevailing trend.
  7. Economics

    The ABCs Of Stock Indexes

    Indexes can track market trends, but they're not always reliable. Can you trust them?
  8. Investing Basics

    Subprime Lending: Helping Hand Or Underhanded?

    These loans can spell disaster for borrowers, but that doesn't mean they should be condemned.
  9. Options & Futures

    Subprime Is Often Subpar

    Proceed with caution when considering these short-term, high-interest mortgages.
  10. Options & Futures

    Volatility Index Uncovers Market Bottoms

    VIX can gauge when the market has hit bottom - a welcome sign of better things to come.
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. What is Fibonacci retracement, and where do the ratios that are used come from?

    Fibonacci retracement is a very popular tool among technical traders and is based on the key numbers identified by mathematician ... Read Full Answer >>
  4. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  5. Do FHA loans require escrow accounts?

    Federal Housing Administration (FHA) loans require escrow accounts for property taxes, homeowners insurance and mortgage ... Read Full Answer >>
  6. Do FHA loans have prepayment penalties?

    Unlike subprime mortgages issued by some conventional commercial lenders, Federal Housing Administration (FHA) loans do not ... Read Full Answer >>
Hot Definitions
  1. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  2. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  3. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
  4. Dark Pool Liquidity

    The trading volume created by institutional orders that are unavailable to the public. The bulk of dark pool liquidity is ...
  5. Godfather Offer

    An irrefutable takeover offer made to a target company by an acquiring company. Typically, the acquisition price's premium ...
Trading Center