Asset-backed securities index
What is the asset-backed securities index?
This is a tool to measure the overall exposure of subprime mortgage loans given to people with poor credit ratings. It allows institutions to calculate whether the total value of such loans is going up or down.
Where have you heard about the asset-backed securities index?
Also referred to as the ABX Index, many traders will keep an eye on its performance - especially those with an interest in subprime mortgage investments.
What you need to know about the asset-backed securities index.
The ABX Index is made up of 20 bonds that form groups of subprime mortgages. The total value is calculated using credit default swap contracts. An increasing index means a lower risk on subprime loans and vice versa. However, even if you are not directly affected by such markets, they often have a wider importance. The 2008 global recession was partially attributed to huge numbers of subprime mortgages in the US. Many of these borrowers then defaulted on the loans, sparking a credit crisis that caused chaos across the world's economies.
Find out more about the asset-backed securities index.
This index measure the risk of mortgage loans to people with poor credit ratings.