CDX Series Rolls, Maturity, and Credit-Event Versions

# CDX index versions after series maturity


# CDX index versions after series maturity












Can someone explain the situation when the next version of some CDX index is created after index maturity, so the version is created, but that version is not being traded as series already matured? Why it is happening?

## Answer by vanguard2k (score 3)

https://quant.stackexchange.com/a/58330

SE!

There might be a misunderstanding on your side I think. If I misunderstood you, you might want to rephrase your question.

There might be a misconception between on/off the run contract and matured contract. The old version still exists until its respective maturity, it is just less and less liquid as it is "off the run".

For Europe, if we look at the itraxx Europe Series 34 5y, started the 21st of September 2020 and matures 20th of December 2025. It will exist until then.

For the itraxx europe series 33 5y, started the 20th of March 2020 and matures the 20th of June 20205.

Today, both series 34 and series 33 exist and can be traded. However, series 34 is the on the run issue. Many market participants will have "rolled" the series 33 by closing their positions and re-opening analogue positons in the series 34 contract.

## Answer by Dimitri Vulis (score 3)

https://quant.stackexchange.com/a/58332

A new series is created now every 6 months. It becomes the "on the run series". The previous series are "off the run". They can still trade until their maturity, but they have less liquidity (less volume, wider bid-ask). In a new series, names are sometimes deleted, new names are added to replace old ones; for indices that are not equal-weighted, the weights are sometimes changed.

We sometimes refer to the series maturity, meaning 5Y. This is a little sloppy, because indices like CDX IG and HY have 5Y, 7Y, and 10Y teors. The 5Y is by far the most liquid, but after it matures, the 7Y continues to trade (very thinly) for 2 years, and 10Y continues to trade (very thinly) for 5 years.

When a single name experiences a credit event, or has to be removed for some other reason, then a new verison is created for all the indices (on the run and off the run but not yet matured) that contained this name. The previous versions cannot be traded. The only change to the index is that the notional factor is reduced by the weight of the deleted name.

The previous version cannot be traded because that's how indices are designed. While you can trade a single-name CDS after a credit event and until the auction to take a view on recovery, it is a very different trade from an index that expresses the view on credit spreads, not on recovery.

Let us look at mark-it.com/NewsInformation/ViewArchive/CDX for an example. June 30, 2020: "Following the confirmation of a Bankruptcy Credit Event on Chesapeake Energy Corporation, new versions of all affected Markit CDX indices have been issued with an annex date of 30th June 2020." The earlist afftected series I see is CDX.NA.HY series 15, which got a new version 21. Although the 5Y and 7Y S15 matured years ago, but the 10Y S15 matures December 20, 2020 and still can be traded, at least in theory. Therefore it needs a new series.

I have not seen a situation where a new version would be created for an off the run series that has already matured (including 10Y). Maybe some automated process does it, but I don't see it happening.

## Answer by Drew (score 1)

https://quant.stackexchange.com/a/80916

This can happen if a single name in the index experiences a credit event just prior to maturity of the index instrument, but before the auction for the defaulted instrument. In this case, an amount remains due to the protection buyer, but the exact amount isn't resolved until the auction. The creation of the next version (that never trades) coincides with the settlement of the credit event. (The only example I know of was in CDX.NA.HY.24 5Y in 2020.)