Chapter 19 Exchange: Traded Funds KT

Question 1

ETF that seeks to replicate, net of expenses, the inverse performance of a reference index.

Answer 1

inverse ETFs

Question 2

ETFs that employ covered calls to enhance the yield and reduce the volatility of owning the underlying stock or portfolio.

Answer 2

covered call ETFs

Question 3

The broker who has a contractual agreement with an ETF company to aid in the creation and redemption of ETF units.

Answer 3

designated broker

Question 4

The process by which the portfolio manager selects a smaller group of securities and their weighting to best match the performance of the overall index.

Answer 4

sampling

Question 5

The measure of the simple difference between the return on an underlying index or reference asset and the return on the ETF that tracks the index or reference asset.

Answer 5

tracking error

Question 6

ETF that invests in futures contracts of different commodities, with an underlying portfolio of money market instruments to cover the full value of the contracts.

Answer 6

futures-based ETFs

Question 7

ETFs that are constructed with derivatives, such as swaps, to achieve the return effect of the index.

Answer 7

synthetic ETFs

Question 8

A type of ETF that invests in a commodity directly.

Answer 8

physical-based ETFs

Question 9

ETF invests in listed companies that are involved in exploration and development or in the processing or refining of a commodity.

Answer 9

equity-based ETFs

Question 10

Exchange-traded debt obligations issued by a bank that promise to pay investors a return on their investment based on the performance of a specific reference asset such as an index or another benchmark?

Answer 10

exchange-traded notes

Question 11

A type of ETF that takes a goal-oriented approach, rather than following a standard index.

Answer 11

rules-based ETFs

Question 12

ETF holdings that are focused on riskier sectors of the markets and are used to boost returns above core asset returns.

Answer 12

satellite holdings

Question 13

The term that describes the current cash market price of a commodity or financial instrument that is available for immediate delivery.

Answer 13

spot price

Question 14

ETFs that are focused on commodity holdings or holdings that replicate or are related to commodities.

Answer 14

commodity ETFs

Question 15

The type of loss that can result when a near-term futures contract approaches expiration and is rolled over into a more distant contract.

Answer 15

roll yield loss

Question 16

What are the typically passive ETF investments that are intended to provide the majority of returns?

Answer 16

core holdings

Question 17

A type of ETF that delivers daily investment results that correspond to a multiple of the daily performance of a reference index.

Answer 17

leveraged ETFs

Question 18

What is an open-end mutual fund trust, trading on major stock exchanges, that holds the same stocks in the same proportion as those included in a specific stock index?

Answer 18

exchange-traded funds