Can anyone please explain how fixed income index are actually replicated (in an ETF) by asset managers ? I looked online, everyone says they do sampling (stratified sampling) which makes sense but I would like to read a bit more details.
I can see the variables to be considered can be so many:
Duration, Credit Quality, Coupon, Maturity, Country, Type (CB, Straight, Covered)
Of course in the case of equity, to economize cash people trade futures. How does this work in case of Bonds. Do they trade Bond Futures, Swaps ?
Any experience or resource would be highly appreciated.