Sentences with phrase «do arbitrageurs»
ETFs do not vary much from the underlying NAV because when they do arbitrageurs step in to redeem or create ETF units, a feature not available with CEFs.
http://www.canadiancapitalist.com/ Not exact matches
Do you mean risk in the sense that when you buy and sell mutual funds, you get the exact NAV price calculated at the end of the day; when you buy and sell ETFs you have a free market price that while it's unlikely to diverge much from the underlying NAV because arbitrageurs gonna arbitrage, it theoretically could?
This constant buying and selling by the arbitrageurs reduces the fund manager to do the re-balancing, thereby saving on transaction fees, hence ETFs have low transaction fees.
When the price of the futures and that of the basket of underlying stocks converged, as they do later when the futures contracts settle, the arbitrageur closes out the hedge and captures the original spread as a profit.
But the institutions had sold massive amounts of futures, and the index itself didn't fall nearly as far because the terrified arbitrageurs wouldn't exploit the spread.
«We recognize this doesn't completely solve the problem for arbitrageurs because there is the fiat currency side of arbitrage.