Synthetic ABS: Volatile ABX index stymies tranches

A lack of comfort with the new product, and muted risk appetite for the asset class, resulted in thin market conditions for the newly launched ABX tranches – called TABX. The thunder of the much-anticipated start to TABX was stolen by the dramatic price falls in the ABX. Although the pace of innovation in the synthetic ABS sector has been nothing short of breathtaking – in a little over a year the market has developed indices, single-name CDS and now tranches – the latest innovation comes at a time when dealers’ view of the technology is far from clear-cut.