Credit Linked Notes (CLNs) on iTraxx Indices

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As communicated Vontobel is now able to provide clients with Credit Linked Notes (CLNs) on European iTraxx indices directly via deritrade from an investment size of CHF 10,000. 
iTraxx indices are a family of tradable credit default swap (CDS) indices that enable investors to express a view on credit as an asset class. By investing in CLNs on iTraxx indices, investors will be able to diversify their credit exposure across a basket of well-recognized single-name issuers, reducing the impact of individual credit events on their portfolios.
The following European iTraxx indices have been added as quotable instruments for CLNs

  • iTraxx Europe
  • iTraxx Europe Crossover
  • iTraxx Europe Senior Financial
  • iTraxx Europe Subordinated Financial

Given the diversified risk exposure offered by these credit indices, idiosyncratic credit risks associated with single-entities are effectively reduced. To get a sensing of the likelihood of credit events from historical perspective, we looked back at 38 sets of series data on the European iTraxx indices from June 2004 to September 2022.


Difference between CLNs on iTraxx indices and vanilla CLNs on single reference entities

  iTraxx Single Reference Entities
Tenors/Maturities Fixed maturities based on standard CDS maturity dates. Flexible maturities.
Credit Event Adjustments The Current Interest Bearing Amount will be reduced by the amount tagged to the affected reference entity. Coupon payments and the redemption value of the note will be decreased. Product will be redeemed early at the Liquidation Amount that corresponds to the market value of the reference bond.
Redemption at Maturity The investor receives the Current Outstanding Amount, which could be less than 100% of the nominal value should there be a credit event that occurred on any of the reference entities. If no credit event has occurred, the note will be fully redeemed at 100% of the nominal value.


Would you like to learn more about CLN on iTraxx Indices
Reach out to our deritrade team today. We are here to guide you every step of the way, helping you achieve your financial goals with confidence and efficiency.