Chapter 17: Derivative-Based ETFs

In this section

• Derivative-Based ETFs Introduction
  Explore how ETFs use derivatives to replicate market performance, provide leverage, and access hard-to-reach asset classes, including key considerations around counterparty risk, regulatory guidelines, and daily resets.
• Commodity ETFs
  Explore how Commodity ETFs leverage derivatives and underlying physical assets to track commodities, discussing contango, backwardation, and regulatory considerations in Canada.
• Swap-Based ETFs and the Synthetic Replication of Indexes
  Explore how Swap-Based ETFs use total return swaps to replicate index performance, mitigate tracking error, and navigate Canadian regulatory requirements.
• Leveraged and Inverse ETFs
  A deep dive into leveraged and inverse ETFs, focusing on how they use derivatives to magnify or invert market returns, the potential risks of daily resets and compounding, and key Canadian regulatory considerations. Explore real-world scenarios, best practices, and tips for informed investing or hedging.
• Risks of Daily Resets in Leveraged ETFs (Path Dependency)
  Explore the compounding effects and volatility risks inherent in leveraged ETFs, understanding how daily resets can lead to performance divergence due to path dependency.
• Regulatory Caps on Leverage & Disclosure
  Explore Canadian regulatory limits on leverage and short selling in derivative-based ETFs, along with essential disclosure requirements, stress testing, and best practices for investor protection.
• Volatility & Sector-Specific Derivative-Based ETFs
  Explore how volatility and sector-specific derivative-based ETFs track niche markets, manage risk, and offer specialized exposure in today's evolving financial landscape.