what is the credit default swap index cdx 
the credit default swap index cdx formerly the dow jones cdx is a benchmark financial instrument made up of credit default swaps cds that have been issued by north american or emerging market companies the cdx was the first cds index which was created in the early 2000s and was based on a basket of single issuer cdss understanding the credit default swap index cdx a credit default swap cds is an over the counter derivative contract that offers one counterparty protection against a credit event such as the default or bankruptcy of an issuer it can be thought of as insurance in the financial world the credit default swap index cdx tracks and measures total returns for the various segments of the bond issuer market so that the overall return of the index can be benchmarked against funds that invest in similar products investors can use the cdx s tracking to monitor their own portfolios against this benchmark and adjust their holdings accordingly the cdx helps to hedge risk by protecting bond investors against default and traders use cdx indexes to speculate about potential changes in issuers credit quality the credit default swap index cdx is itself a tradable security a credit market derivative but the cdx index also functions as a shell or container as it is made up of a collection of other credit derivatives credit default swaps cds currently the cdx contains 125 issuers and is broken down by two different types of credits investment grade ig and high yield hy every six months the underlying securities of the cdx are examined and if appropriate replaced with new securities this helps to ensure that the index remains current and is not cluttered with investments that no longer exist or which are very illiquid the cdx index rolls over every six months and its 125 names enter and leave the index as appropriate for example if one of the names is upgraded from below investment grade to investment grade it will move from the high yield index to the investment grade index when the rebalance occurs 