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Mastering Credit Derivatives: A step-by-step guide to credit derivatives and structured credit, Second Edition by Andrew Kasapis

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Chapter 5. Tranched indices

While the market for outstanding synthetic CDOs is vast and quite diverse with respect to structural complexity, it remains fragmented as discussed in Chapter 1. The emergence of standardized, tradable and relatively diverse default swap indices in 2003 provided an opportunity for an on-the-run market for tranches to develop shortly thereafter. Today, tranched index instruments are by far the largest liquidity point in the structured credit market, serve as an entry point in the structured credit market, serve as an entry point for many investors and have been responsible for making the business mainstream.

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