Replication · Question 9 of 12
Which forms of physical replication exist for ETFs?
2 answers are correct. Medium
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Answer
- B Optimised sampling with a representative selection
- C Full replication with all index constituents
Explanation
Physically replicating ETFs actually hold the securities. For large indices with many, sometimes illiquid constituents, they often buy only a selection that tracks the index as closely as possible. Swaps are the hallmark of synthetic replication.