ABX index

AAA

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.

INVESTOPEDIA EXPLAINS '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. Benchmark

    A standard against which the performance of a security, mutual ...
  4. Subprime Mortgage

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

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

    A swap designed to transfer the credit exposure of fixed income ...
Related Articles
  1. An Introduction To Stock Market Indexes
    Investing Basics

    An Introduction To Stock Market Indexes

  2. Introduction To The Arms Index
    Active Trading

    Introduction To The Arms Index

  3. Accumulative Swing Index And The McClellan ...
    Active Trading

    Accumulative Swing Index And The McClellan ...

  4. Investing In Securitized Products
    Insurance

    Investing In Securitized Products

comments powered by Disqus
Hot Definitions
  1. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center