Eurex, the international derivatives exchange, will start trading in credit index futures on 27 March with three contracts.
In addition to the already announced future based on the iTraxx Europe 5 year, Eurex will offer futures contracts on the iTraxx HiVol 5 year and iTraxx Crossover 5 year indices.
The iTraxx Europe index is an equally weighted portfolio of the 125 most liquid European investment grade credit default swap (CDS) entities. The iTraxx HiVol index is an equally weighted portfolio of the 30 entities with the highest spread from the iTraxx Europe index while the iTraxx Crossover index is an equally weighted portfolio of 45 European sub-investment grade entities.
Eurex CEO Andreas Preuss, speaking at the 32nd annual Futures Industry Conference in Boca Raton, Florida, last week, said: “The launch of credit derivatives is an important element of our product initiative. We have observed strong interest in the market for all three credit futures. With our Eurex iTraxx futures suite customers can manage their credit risk at the lowest cost with all the advantages an exchange-traded product offers.”
All three underlying indices are provided by International Index Company. The contracts will have a fixed coupon and semi annual maturity dates in March and September. The Eurex iTraxx credit futures will closely mimic the risk structure of credit default swaps traded in the over-the-counter market.