Understanding ETF Values

Once you understand how the creation and redemption mechanism works, the next most important part of the process is to understand how to calculate the value of the ETF. The products have essentially four critical numbers that are important at various times throughout the valuation and execution process: the NAV (net asset value), the IV (indicative value, also known as the IOPV, indicative optimized portfolio value), the eNAV (estimated NAV), and the price.

Net Asset Value (NAV)

The NAV is a straightforward accounting of the actual assets of the fund.

NAV = (Assets – Liabilities) / Shares outstanding

The official NAV is published once daily by each ETF, a true similarity to their mutual fund cousins. It is calculated ...

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