What are 'CMBX Indexes'

CMBX Indexes are a group of indexes that track the commercial mortgage-backed securities(CMBS) market. The indexes represent 25 tranches of CMBS, each with a different a credit rating. These indexes enable investors to gauge the market and take long or short positions via credit default swaps, which put specific interest rate spreads on each risk class. The pricing is based on the spreads themselves rather than on a pricing mechanism.


The indexes are reconstituted every six months to bring in new securities and thereby continuously reflect the current health of the CMBS market. Daily trading involves cash settlements between the two parties to any transaction. This "pay as you go" settlement process considers three events in the underlying securities as "credit events": principal writedowns, principal shortfalls (failures to pay on an underlying mortgage) and interest shortfalls (when current cash flows pay less than the CMBX coupon).

Results of the Introduction of CMBX Indexes

The introduction of indexes like the CMBX has led to massive growth in the structured finance market, which includes credit default swaps, commercial mortgage-backed securities, collateralized debt obligations and other collateralized securities. Trading in the CMBX tranches is done over the counter, and liquidity is provided by a syndicate of large investment banks.

While the average investor cannot participate in the CMBX indexes directly, they can view current spreads for a given risk class to assess how the market is digesting current market conditions, making it a potentially valuable research tool.

  1. Residential Mortgage-Backed Security ...

    Residential mortgage-backed securities are a type of security ...
  2. North American Loan Credit Default ...

    A specialized index of loan-only credit default swaps (CDS) covering ...
  3. Sequential Pay CMO

    A type of collateralized mortgage obligation (CMO) in which there ...
  4. Indexing

    In the financial markets, indexing can be used as a statistical ...
  5. Asset Backed Credit Default Swap ...

    A redit default swap wherein the reference asset is an asset-backed ...
  6. Credit Spread

    1. The spread between Treasury securities and non-Treasury securities ...
Related Articles
  1. Trading

    Using Index Futures to Predict the Future

    Want to know whether the stock market will open up or down? Learn about index futures and how they can help predict how the market will trade.
  2. Investing

    5 Things You Need To Know About Index Funds

    Index funds, at their best, offer a low-cost way for investors to track popular stock and bond market indexes. But not all index funds are created equally.
  3. Investing

    ETF Tracking Errors: Protect Your Returns

    Tracking errors tend to be small, but they can still adversely affect your returns. Learn how to protect against them.
  4. Trading

    How Are Interest Rate Swaps Valued?

    When trading in financial markets, higher returns are generally associated with higher risk. Hedge your risk with interest rate swaps.
  5. Trading

    An Introduction To Swaps

    Learn how these derivatives work and how companies can benefit from them.
  6. Investing

    Top Mortgage-Backed Securities ETFs

    Investing in mortgage-backed securities has many advantages, but studying their history may make you wary.
  7. Investing

    PIMCO’s Mutual Fund for Investment Grade Bonds (PTTRX)

    Explore the complicated and often arcane makeup of the PIMCO Total Return Fund, and identify the fund's management style and top five holdings.
  8. Investing

    Is Your Mutual Fund Safe?

    You might be carrying more risk than you think if your fund invests in derivatives.
  9. Investing

    3 Bonds You May Have Never Heard Of

    These lesser-known bonds may give your portfolio a boost when other investments products fall short.
  10. Investing

    How to Use Index Funds to Diversify Your Portfolio

    Index funds can act as quality diversification tools.
  1. What is a tranche?

    A tranche is a security, like a collateralized mortgage obligation, that can be split up into smaller pieces and subsequently ... Read Answer >>
  2. In what types of financial situations would credit spread risk be applied instead ...

    Find out when credit risk is realized as spread risk and when it is realized as default risk, and learn why market participants ... Read Answer >>
  3. How do companies benefit from interest rate and currency swaps?

    An interest rate swap involves the exchange of cash flows between two parties based on interest payments for a particular ... Read Answer >>
  4. How Do I Find Mutual Funds That Track Indexes?

    Two good sources for finding index funds are Fidelity Investments and Vanguard. Read Answer >>
  5. Who is the counterparty of a derivative?

    Learn about the counterparty to a derivative contract, and how derivative swap agreements traded over the counter have counterparty ... Read Answer >>
Hot Definitions
  1. Standard Deviation

    A measure of the dispersion of a set of data from its mean, calculated as the square root of the variance. The more spread ...
  2. Entrepreneur

    An Entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture. ...
  3. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  4. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  5. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  6. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
Trading Center