iTraxx
ITraxx is the name of a family of credit default indices, covering the European and Asian regions. The indexes to the development of the relevant credit derivatives markets documented representative. The iTraxx indices are operated by the International Index Company, a 100 % subsidiary of MarkIt.
ITraxx indices are quoted in basis points of the nominal value. This is the annual cost depending on the insured for a nominal value proportional hedge represented in the index debtor. In addition to the subdivision of the iTraxx into individual sub-indices this most sub-indices are again divided into different maturities. Thus, the iTraxx Europe is calculated, for example, for maturities 3, 5, 7 and 10 years.
Tradable products
- Credit default swaps ( CDS) can also be completed with a iTraxx as underlying. This provides investors with little effort the possibility of credit risk through a diversified portfolio of long and short to go. The OTC business for a relatively high degree of standardization of the contracts should lead to a high degree of liquidity and thus to narrow bid -ask spreads.
- It can be ( similar to a Collateralized Debt Obligation ) completed on the iTraxx Europe also tranched CDS. This is available with the tranches 0-3 %, 3-6 %, 6-9 %, 9-12 % and 12-22 %. Thus, the investor can enter into a commitment with respect to the correlation of the debtor named in the portfolio except for credit risk.
- At Eurex, the trading of futures on the iTraxx Europe, iTraxx and iTraxx Crossover HiVol is possible in principle.
Roll
Every six months, in March and September, the companies included in the indices are updated. This also iTraxx roll is called ( English language for roll ). Unlike many other indices such as the DAX, the company will not be easily replaced in the indices, but there are whole new indexes created. The various versions are called series. The latest series is called on the run. For example, the streamlined arte iTraxx Europe in March 2009, the 11 series in April 2009 on the run.
It should be noted that the old series not disappear. These will continue to be calculated, since the term of the iTraxx indices is significantly higher than the on the run - time of half a year. The greatest attention is on the current series, respectively.
When you roll determines which annual premium must be paid as a spread for the new series over the term, provided that a iTraxx CDS was traded on an index. This premium remains over the term of the index unchanged even if market movements. If we exclude during the term of a CDS index on these from, the counterparty will pay the difference between the set of 'roll, and the calculated from current market prices premium than cash or upfront on their opponent.
Failure of a debtor during the term
If one of the insured borrower within a iTraxxes this is taken without replacement from the iTraxx index. If a CDS was traded to the affected Itraxx, the failure of the debtor, such as a failure to a single CDS on these debtors in the amount of the Pro Rata Notional Amount of the iTraxx CDS is treated.