I am wondering how UBS hedges its exposure to its ETN XVIX. Unless I am grossly overestimating the trading costs, executing the strategy they describe in their prospectus with futures would be quite expensive, especially since they would incur some slippage (back months are not super liquid).
Any ideas on how they do it? Do they have some way to reduce the amount of trades they have to execute in order to track the indices they base their strategy on (SP indices)?