Liquidity of CDS indices

CDS index is more liquid than single-name CDS. why


Straight from Investopedia lol: Credit Default Swap Index (CDX) Definition

" The CDX is completely standardized and exchange-traded, unlike single CDSs, which trade [over the counter] (OTC). As such, the CDX index has a high level of [liquidity]and transparency.

CDX indexes also may trade at smaller [spreads] Thus, investors may hedge a portfolio of default swaps or bonds with a CDX more cheaply than if they were to buy many single CDSs to achieve a similar effect."

Think of trading a bond ETF compared to trading a single bond.