SIE practice questionmediumETFs - Redemption Process
Unlike mutual funds, ETFs maintain price alignment with underlying assets primarily through:
- ADaily calculation and publication of NAV
- BCreation and redemption mechanism by authorized participants✓ Correct answer
- CShare buybacks by the issuer
- DRedemption by retail investors at NAV
Explanation
Why B — Creation and redemption mechanism by authorized participants
Authorized participants create and redeem ETF shares to keep prices in line with NAV. B is true for all funds but does not align trading prices; C and D are not part of ETF price arbitrage.
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