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.

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. Asset-Backed Security - ABS

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

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

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

    A type of mortgage that is normally made out to borrowers with ...
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