Fitch Releases Analysis On New iTraxx Europe CDS Index.LONDON -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. , the international rating agency, announced today that it initiated coverage of the new iTraxx Europe credit default swap Credit Default Swap A swap designed to transfer the credit exposure of fixed income products between parties. Notes: The buyer of a credit swap receives credit protection, whereas the seller of the swap guarantees the credit worthiness of the product. (CDS) index. Consisting of 125 reference entities, the iTraxx Europe CDS index allows investors to gain exposure to various tranches Tranches A piece, portion or slice of a deal or structured financing. This portion is one of several related securities that are offered at the same time but have different risks, rewards and/or maturities. "Tranche" is the French word for "slice". of a diversified diversified (di·verˑ·s portfolio of the most liquid investment grade European corporate reference entities. Monthly credit assessments of various risk tranches and supporting analytics are available exclusively on Fitch's credit derivatives Credit Derivative Privately held negotiable bilateral contracts that allow users to manage their exposure to credit risk. Credit derivatives are financial assets like forward contracts, swaps, and options for which the price is driven by the credit risk of economic agents (private web site, 'www.fitchcdx.com'. The current iTraxx index replaces the DJ TRAC-X Europe 100 (TRAC-X) and iBoxx Diversified (iBoxx) indices. 'The merger of the two competing indices benefits investors by creating one standard trading platform for the European corporate CDS index,' said Benjamin Accam, Associate Director, Fitch Ratings. 'This merger eliminated any discrepancies that arose due to the differences between the iBoxx and TRAC-X indices.' The iTraxx CDS index is based on 125 reference entities compared to 100 each in iBoxx/TRAC-X. 21 new reference entities (in neither iBoxx nor TRAC-X) were included in iTraxx and 28 and fourteen reference entities that were respectively in iBoxx and TRAC-X have been excluded from iTraxx. Credit events for iTraxx include bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most , failure to pay, and restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). , as in the prior indices. The contracts under the iTraxx index began trading at the end of June. The credit risk of the iTraxx index is similar to that of the iBoxx and TRAC-X indices. Furthermore, the iTraxx Fitch Portfolio Correlation Level (PCL (Printer Command Language) The page description language for HP LaserJet printers. It has become a de facto standard used in many printers and typesetters. PCL Level 5, introduced with the LaserJet III in 1990, also supports Compugraphic's Intellifont scalable fonts. ) of 0.21 is consistent with the PCLs of iBoxx and TRAC-X at 0.21 and 0.23, respectively, and the same weighted average rating of 'A-/BBB+' has been maintained in the iTraxx pool as in iBoxx and TRAC-X pools. The top three industry concentrations in iTraxx are: Banking & Finance (20.80%), Utilities (12.80%) and Telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. (8.80%). In comparison, the top three concentrations (average) of the previous indices iBoxx/TRAC-X were: Banking & Finance (20%), Telecommunications (10.50%) and Automobiles (7%). Business Services -- which had 1% concentration in both TRAC-X and iBoxx -- has been excluded as an industry. The top three country concentrations in iTraxx are: United Kingdom (32%), Germany (17.60%) and France (16.80%). Again in comparison, the top three (average) concentrations of iBoxx/TRAC-X were: United Kingdom (27.50%), France (20.50%) and Germany (18.50%). No Belgian and Norwegian reference entities are currently included (Belgium had a 2% concentration in iBoxx, Norway had 1% concentration in TRAC-X and iBoxx). About FitchCDx.com FitchCDx.com is an integrated web-platform providing market-oriented, advanced analysis and data for the credit derivatives market -- consolidating all of Fitch Ratings' analysis and research on credit derivatives. FitchCDx gives users unique access to a combination of market information and fundamental analysis. FitchCDx.com users can access the iTraxx analytics under Index Analytics. |
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