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- rolandograndi
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Synthetic ETF
Hello everyone!Can you please explain me how synthetic ETF works? I initially tought ETF where only physical replication of an index but it seems it is not always the case.Thanks for your help!Best regards.
Synthetic ETF
quite often the etf will enter in a swap with an investment bank. in some cases there may be two swaps. one is where the returns are exchanged and the second is for "efficient balance sheet usage" whereby the ETF "lends" its assets to the bank through a repo.
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Synthetic ETF
Let's say you wanted to start a Gold ETF.You could buy gold bullion and store it in a bonded warehouse (like GLD does), or you could buy gold futures and roll them forward before delivery occurs. The latter (synthetic) way is simpler, but it introduces some additional risks because there is an extra mechanism (the gold futures exchange) between you and the shiny yellow metal.