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Closed-End Funds
A type of fund that has a predetermined amount of shares and those will be the only shares created. Trades on a day-to-day basis which makes them more prone to trading at a premium or discount.
Contango/Backwardation
These are terms used to describe roll costs from one futures contract to the next. When the contract is expiring at a cheaper cost than the next months contract it is seen as contango. On the other end when a futures contract is expiring in the premium it is seen as backwardation.
Counterparty Risk
This is a risk that investors take in knowing that the other side of the deal might fall through. Exchange-traded notes are a good example of this risk as the institution that gave them the note are expecting them to repay their debt.
Creation/Redemption Mechanism
This is the process in which the authorized participant (AP) creates and redeems shares of the ETF to stay in line with their net asset values. Its a bit more than that though as the AP must first buy the securities and then give them to the ETF issuer for processing. If the AP wishes to redeem shares the process is reversed.
Custodian
A large bank usually takes on this role and they are responsible for the safekeeping of all the assets and cash that an ETF has. They also handle the processing of trades and the creation/redemption process.
