Credit Default Swaps (CDS)
Price Calculation Method and Constituents
Markit iTraxx Japan index is the leading credit index for CDS trading in Japan. Markit has the license with JSCC to calculate and publish the settlementprice on a daily basis for JSCC. Markit collects tradable closing prices from the licensed market makers every day and calculates the settlementprice by cleaning and averaging the contributed data. The index rolls every six months (on 20Mar and 20Sep)-a new series of the index is created with updated constituents. As per the Markit iTraxx Japan Rules; 40 investment-grade Japanese entities are selected for the index based on the average weekly trading activity as measured in the 6 Month Analysis Top 1,000 Single Names report published by DTCC. This report measures liquidity over the last six months preceding the last Friday of the month prior to the Roll Date and is publicly available. The latest index series is called the "on-the-run"series, while the previous series are called "off-the-run". It is important to note that each previous series continue trading independently while the latest “on the run” series trades. Markit publishes the daily prices for the off-the-run indices and access to it requires subscription.
Markit iTraxx Japan and the index rules and constituents are available on:
Settlement Statistics for Credit Default Swap
For Settlement Statistics for Credit Default Swap, please use the link below.
What Differentiates Credit Indices from Other Indices?
CDS indices including the Markit iTraxx Japan index are called the "Hedge Index". They serve as liquid index to assess the credit risk in a certain market segment. The price of bond or equity indices is calculated on the basis of spot price of the constituents, while the one for the Credit Indices trade independently from their intrinsic value (they trade as a unique instrument). Since CDS indices are swap trades, it is important to note that cash flows occur not only on the trade date, but also on coupon payment dates during the contract term and on credit event settlement dates. Buying and selling protection on the indices is equivalent to buying and selling protection on a portfolio of single name CDS. If a credit event occurs in one of the index constituents, settlement is by one of two means-physical or cash settlement, similar to single name CDS. Markit, as the administrator of the index, will create a new version of the index series after credit event has been announced. This new version will trade without the defaulted entity.
About Markit Group Limited
Markit is a leading, global financial information services company. The company provides independent data, valuations and trade processing across all asset classes in order to enhance transparency, reduce risk and improve operational efficiency. Its client base includes the most significant institutional participants in the financial marketplace. For more information, please use the link bellow.
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