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Market makers may take loans out to create ETF shares or redeem shares to repay loans. In my experience working with an ETF desk, that activity usually does not affect index pricing much. However, in a crisis it could lead to mispricings versus index futures if creation or redemption is restricted. What you also see is that ETF market makers use loans (repos ...


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Investors buy (and hold) more puts and pay up more for them for a few reasons. First, people fear downside more than they like upside as shown by Kahneman and Tversky (1979, 1992). Second, people may not be able to recover easily (or at all) from downside in the macroeconomy. In classical finance terms, if we think crises are different from times of stable ...


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There are two types of loans involved in creating and redeeming ETFs: Stock or bond borrow / repo Collateral requirements for the creation/redemption process. When you create and redeem ETFs you often don't have the perfect basket. Or you might take some time to accumulate the basket. You need to finance those positions using borrow (For shorts) and ...


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As it happens, I, in a past life, was part of the team that created the UBS-CMCI commodity indices... Your problem will (probably) lie in mismatch between the methodology of monthly rolls a la the index's rolling methodology and the rolls on Bloomberg's generic front-vs-second month contracts. Most of the time, these will neatly equate. But every now and ...


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You can use either the spot value of the index (STXE) or the Futures Price for the current contract (FX*0) to compute the Market Return ($R_M$) on any day. The advantages and disadvantages are: The Spot price (which is computed from the prices of the underlying stocks) is easily available and computing returns is easy ($\frac{S_{t}-S_{t-1}}{S_{t-1}}$). The ...


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You may use EuroStoxx 50 futures as a market proxy for stocks in the index as well as other stocks. You could also use the STOXX Europe 600 (a better index, but with much lower futures liquidity) or build your own index from the DAX, CAC 40, FTSE 100, IBEX, MIB, AEX, BEL20, SMI, ATX, OMX, WIG, HEX, etc. Handling futures expiry is usually done by switching to ...


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