The Loan Credit Default Swap Index (Markit LCDX) is a powerful tool for corporations and investors alike. As the index is composed of 100 fairly large North American companies, it provides incredibly vital insight into the overall health of the North American corporate debt markets. Given the LCDX covers many companies from many industries, it allows firms to get an idea of the current corporate debt environment without needing to research individual companies and/or sectors.

LCDX allows investors to hedge their investments in corporate debt, as well as offering a great way to gain income from corporate bonds by writing CDSs. Investors can profit from changes in the yield of the index by buying (going long) when the yield decreases and shorting when the yield increases. The size of the LCDX also makes for great correlation metrics for other debt instruments, making it easy to compare risk against market averages.

LCDX is also a form of insurance for firms, as the CDSs insure their debt from a potential default or other credit event, allowing new debt and refinancing to occur easier. The index also provides a great way to assess the credit risk of an entire company, or a diversified portfolio of debt by leveraging off of the LCDX.

The Loan Credit Default Swap Index (Markit LCDX) has been invaluable in helping investors and corporations manage risk, as well as providing an excellent tool to evaluate and invest in the corporate debt market. The ability of the LCDX to track a range of different debt instruments with a high degree of accuracy, allows firms to make more informed decisions in investment and debt offerings. With the continuously changing landscape of the financial markets, the LCDX is an invaluable tool to have in assessing risk, maximising returns and providing liquidity to the corporate debt markets.