Greshams law says that if you have two currencies with the same govt stated face value, but one has a higher commodity value (i.e. one is made from silver, the other tin), the higher commodity value currency will exit circulation (as people hoard them).
Does anyone know how, say Blackrock, issued ETFs on illiquid assets can unravel? 1. People lose faith in it's convertibility or issuer 2. It starts to trade at a discount to underlying assets 3. People attempt to convert the ETF back with Blackrock, who can't b/c illiquidity?
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Afaik, this hasn't happened in ETFs (yet) which is pretty interesting.
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On #3 do you mean an in-kind redemption vs cash?
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As I understand it, you can trade an ETF for the underlying assets that compose it. For example, for a Fortune 100 ETF, I can trade it for 1 share of the top fortune 100 publicly traded companies.
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