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. 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 ...
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 the difference between "closed end credit" and a "line of credit?"

    Depending on the need, an individual or business may take out a form of credit that is either open- or closed-ended. While ... Read Full Answer >>
  4. In what instances does a business use closed end credit?

    The most common types of closed-end credit used by both businesses and individuals are mortgages and auto loans. Businesses ... Read Full Answer >>
  5. What are the long-term effects of delinquent accounts?

    Delinquency occurs when borrowers fail to make payments on their loans. All loan borrowers should do their best to avoid ... Read Full Answer >>
  6. How was the American Dream impacted by the housing market collapse in 2008?

    The American Dream was seriously damaged by the housing market collapse in 2008. In many ways, the American Dream is a self-fulfilling ... Read Full Answer >>
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.

You May Also Like

Hot Definitions
  1. Inbound Cash Flow

    Any currency that a company or individual receives through conducting a transaction with another party. Inbound cash flow ...
  2. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  3. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  4. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  5. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  6. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!