alleryStart learning →What risk can arise when an ETF tracks assets using futures and swaps?
ATracking error and counterparty risk
BLoss of listing on the exchange
CGuaranteed zero volatility
DMandatory front-end load
Answer & Solution
Correct answer: A. Tracking error and counterparty risk
Using derivatives instead of holding the assets can cause the fund to deviate from its index and exposes it to counterparties.
Keep practising Mutual Funds
Browse all Mutual Funds questions for CA Final, or explore more Strategicfinancialmanagement topics.
Related questions
Replication in an index ETF means doing what?An ETF arbitrage mechanism keeps which two values close?Who creates and redeems ETF shares directly with the issuer in large blocks?How does an ETF share differ from an open-end mutual fund unit?What is mismarking in securities valuation?How often are a fund's investments valued for NAV?How many units does a $50,000 investment buy in a no-load fund at NAV of $25?A fund has NAV of $300 million and 2 million units. How many units does a $30 million inve