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ABX index

What is '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.

Explaining '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.


Further Reading


The subprime credit crisis and contagion in financial markets
www.sciencedirect.com [PDF]
… During the first part of 2007, the ABX BBB and BBB−indexes continued their decline. Around the middle of 2007, however, the other ABX indexes began to decrease. By the end of 2007, the ABX AAA index was below 80 and the other indexes were all below 50 …

Knowledge production in financial markets: credit default swaps, the ABX and the subprime crisisKnowledge production in financial markets: credit default swaps, the ABX and the subprime crisis
www.tandfonline.com [PDF]
… During the first part of 2007, the ABX BBB and BBB−indexes continued their decline. Around the middle of 2007, however, the other ABX indexes began to decrease. By the end of 2007, the ABX AAA index was below 80 and the other indexes were all below 50 …

Causes of the financial crisisCauses of the financial crisis
www.tandfonline.com [PDF]
… During the first part of 2007, the ABX BBB and BBB−indexes continued their decline. Around the middle of 2007, however, the other ABX indexes began to decrease. By the end of 2007, the ABX AAA index was below 80 and the other indexes were all below 50 …

The pricing of subprime mortgage risk in good times and bad: evidence from the ABX. HE indicesThe pricing of subprime mortgage risk in good times and bad: evidence from the ABX. HE indices
www.tandfonline.com [PDF]
… During the first part of 2007, the ABX BBB and BBB−indexes continued their decline. Around the middle of 2007, however, the other ABX indexes began to decrease. By the end of 2007, the ABX AAA index was below 80 and the other indexes were all below 50 …

The bear's lair: Index credit default swaps and the subprime mortgage crisisThe bear's lair: Index credit default swaps and the subprime mortgage crisis
academic.oup.com [PDF]
… During the first part of 2007, the ABX BBB and BBB−indexes continued their decline. Around the middle of 2007, however, the other ABX indexes began to decrease. By the end of 2007, the ABX AAA index was below 80 and the other indexes were all below 50 …

Assessing the effectiveness of the Paulson “teaser freezer” plan: Evidence from the ABX indexAssessing the effectiveness of the Paulson “teaser freezer” plan: Evidence from the ABX index
www.sciencedirect.com [PDF]
… During the first part of 2007, the ABX BBB and BBB−indexes continued their decline. Around the middle of 2007, however, the other ABX indexes began to decrease. By the end of 2007, the ABX AAA index was below 80 and the other indexes were all below 50 …

The fractal market hypothesis: applications to financial forecastingThe fractal market hypothesis: applications to financial forecasting
arrow.dit.ie [PDF]
… During the first part of 2007, the ABX BBB and BBB−indexes continued their decline. Around the middle of 2007, however, the other ABX indexes began to decrease. By the end of 2007, the ABX AAA index was below 80 and the other indexes were all below 50 …

The economics of structured financeThe economics of structured finance
www.aeaweb.org [PDF]
… During the first part of 2007, the ABX BBB and BBB−indexes continued their decline. Around the middle of 2007, however, the other ABX indexes began to decrease. By the end of 2007, the ABX AAA index was below 80 and the other indexes were all below 50 …

Information, liquidity, and the (ongoing) panic of 2007Information, liquidity, and the (ongoing) panic of 2007
pubs.aeaweb.org [PDF]
… During the first part of 2007, the ABX BBB and BBB−indexes continued their decline. Around the middle of 2007, however, the other ABX indexes began to decrease. By the end of 2007, the ABX AAA index was below 80 and the other indexes were all below 50 …



Q&A About ABX index


What is an asset-backed securities index?

An asset-backed securities index is a curated list of asset-backed security exposures that are used for performance benchmarking or trading.

How does the ABX index work?

The ABX index uses credit default swap contracts to come up with an overall value and is made up of two bonds that are comprised of groups of subprime mortgages.

Who launched the first ABX Index on 17 January 26?

CDS Indexco and Markit launched the Home Equity (ABX.HE) ABX on 19 January 26.

Who created the ADX Index?

Markit created the ADX Index.

What is the ABX index?

The ABX index measures the value of subprime mortgages.

How does an investor trade exposure to subprime market without holding actual assets?

The investor trades in derivatives such as options and futures contracts based on these indices.

How can you use this information to make better decisions about investments?

Investors can use this information to determine whether or not they should invest in subprime mortgages.

What was the original asset-backed securities index?

The original ABX Index was sponsored by Markit and referenced a basket of two subprime mortgage backed securities.

What does it mean if there is less risk in subprime mortgages?

It means that investors have a better chance at making money.