PM 36.1 - ETF Mechanics and Tracking Error

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4 Terms

1
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ETFs:

  • What do they typically do?

  • What is an AP? What do they do?

  • What is a creation basket?

  • What is the creation unit?

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2
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What is the purpose of the ETF creation/redemption process?

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3
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What is the arbitrage gap and why does it exist?

  • The band ETFs trade w/in NAV due to transactions costs and services fees for creation/redemption that are passed on as bid-ask spreads to the transacting shareholders

4
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tracking error

  • What is it?

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