Credit Index Event Contracts

Credit Index Event Contracts
Credit Index Event contracts merge the benefits of over-the-counter (OTC) credit default swaps with the advantages of exchange-traded derivatives – central clearing and guaranteed counterparty creditworthiness. They provide a transparent and liquid means of writing protection on and acquiring protection against a number of defined corporate credit events, such as bankruptcy and failure to pay.

Credit Index Event contracts provide a way to:

• Hedge credit risk using a basket of high volatility investment grade corporate names
• Potentially profit from a near-term outlook on investment grade credit

Things to know:

• OTC credit default swaps (CDSs) have been available since the mid- to late-1990s, and the outstanding notional value of this marketplace has already grown to approximately $26 trillion
• Contracts trade exclusively on the CME Globex electronic trading platform
  • Available virtually around the clock, around the world
  • Complete price transparency and anonymity 

About Credit Event Index Contracts

Introduced in the mid 1990s, credit derivatives are the fastest growing segment of the over-the-counter (OTC) derivatives market with an outstanding notional value of ~ $26 trillion. Credit indexes, marketed under brand names CDX or iTraxx represent the fastest growing segment of this market. These products are not “indexes” in the traditional sense … but rather, they are derivatives tied to a bundle of corporate credits.

Click here to learn more about CME Credit Index Event contracts.