Back to course

The Net Asset Value of an ETF

NAV=A−LN\text{NAV} = \frac{A - L}{N}

Assets minus liabilities, divided by shares outstanding. The per-share value of what the fund holds.

Move a holding and the NAV moves with it immediately. That is the iNAV a market maker quotes around; the official figure is this same calculation struck once, after the close.

Official NAV is struck once, after the close, using closing prices of the holdings. It is a backward-looking accounting figure.

Traders need a live number, so the market uses iNAV (indicative or intraday NAV), recalculated continuously from current prices of the constituents. This is what a market maker quotes around, and it is the reference for the creation and redemption arbitrage.

Key takeaway

Official NAV is a daily accounting number. iNAV is the live estimate traders use. Comparing an intraday ETF price to yesterday's official NAV compares two different things.

The rest of this lesson is for subscribers

Unlock every lesson in Asset Classes and Trading Products, and every other premium course.

Subscribe to continue

Test your knowledge

Questions are only available to subscribers.
Continue
NextETF Hedging

Keep reading Asset Classes and Trading Products

48 lessons in this course, and every other premium course, on one subscription.

Subscribe now
  • Every lesson in all seven courses, with the worked examples and interactive simulators
  • Graded questions on every lesson, with explanations for the wrong answers as well as the right one
  • The trainers, timed assessments and brainteaser library that go with them