FINANCE QUESTIONS SERIES IV ETFS,
CLOS, AND LBOS QUESTIONS WITH
COMPLETE ANSWERS
In-kind ggexchange gg- ggAnswer ggAllows gginvestors ggto ggexchange ggETF ggshares ggfor
gga ggbasket ggof ggthe ggunderlying ggsecurities, ggrather ggthan ggcash, ggenabling ggtax
ggdeferral.
NAV gg- ggAnswer ggNet ggAsset ggValue, ggthe ggvalue ggof ggan ggETF's ggunderlying
ggassets ggper ggshare.
Authorized ggParticipants gg(APs) gg- ggAnswer ggEntities ggthat ggcreate ggand ggredeem
ggETF ggshares ggin ggthe ggprimary ggmarket, ggensuring ggthe ggETF's ggprice ggremains
ggclose ggto ggits ggNAV.
High-frequency ggtraders gg(HFTs) gg- ggAnswer ggTraders ggthat ggprovide ggliquidity ggin
ggthe ggETF ggmarket ggby ggarbitraging ggsmall ggprice ggdiscrepancies.
Expense ggratio gg- ggAnswer ggThe ggpercentage ggof ggassets ggused ggfor ggoperating
ggexpenses, ggexpressed ggas gga ggpercentage ggof ggthe ggtotal ggassets ggunder
ggmanagement.
In-kind ggredemptions gg- ggAnswer ggAllow ggApollo ggto ggexchange ggETF ggshares ggfor
gga ggbasket ggof ggunderlying ggsecurities gginstead ggof ggcash, ggavoiding ggcapital gggains.
Tracking ggerror gg- ggAnswer ggThe ggdeviation ggof ggan ggETF's ggperformance ggfrom ggits
ggbenchmark, ggindicating gghow ggclosely ggit ggreplicates ggthe ggbenchmark's
ggperformance.
Arbitrage ggmechanism gg- ggAnswer ggAllows ggAPs ggto ggcreate ggnew ggETF ggshares
ggwhen ggprices ggrise ggabove ggNAV ggand ggredeem ggthem ggwhen ggprices ggfall ggbelow
ggNAV.
Mezzanine ggtranches gg- ggAnswer ggRiskier ggsegments ggof ggCLO ggportfolios ggthat
ggabsorb gglosses ggafter ggequity ggtranches ggbut ggbefore ggsenior ggtranches.
, Expected gglosses gg- ggAnswer ggCalculated ggas ggthe ggproduct ggof ggthe ggportfolio
ggvalue ggand ggthe ggdefault ggrate.
Floating-rate ggstructure gg- ggAnswer ggLoans ggthat ggadjust ggtheir gginterest ggpayments
ggbased ggon gga ggbenchmark, ggmaking ggthem ggmore ggattractive ggin ggrising gginterest
ggrate ggenvironments.
Covenants gg- ggAnswer ggConditions ggplaced ggon ggborrowers ggto ggmaintain ggfinancial
gghealth, ggstabilizing ggloan ggpayments ggand ggreducing ggdefault gglikelihood.
Debt-to-EBITDA ggratio gg- ggAnswer ggA ggfinancial ggmetric ggcalculated ggby ggdividing
ggtotal ggdebt ggby ggEBITDA, ggindicating gga ggcompany's ggability ggto ggpay ggoff ggits
ggincurred ggdebt.
Middle-market ggloans gg- ggAnswer ggLoans ggthat ggoffer gghigher ggyields ggcompared ggto
gglarge ggcorporate ggloans, ggenhancing ggreturn ggpotential ggbut ggincreasing ggoverall
ggportfolio ggrisk.
Liquidity gg- ggAnswer ggThe ggability ggto ggquickly ggbuy ggor ggsell ggassets ggin ggthe
ggmarket ggwithout ggaffecting ggthe ggasset's ggprice.
Bid-ask ggspread gg- ggAnswer ggThe ggdifference ggbetween ggthe ggprice gga ggbuyer ggis
ggwilling ggto ggpay ggand ggthe ggprice gga ggseller ggis ggwilling ggto ggaccept.
Tracking ggerror ggof gg0.2% gg- ggAnswer ggIndicates ggthat ggthe ggETF's ggperformance ggis
ggvery ggclose ggto ggits ggbenchmark, ggshowing ggeffective ggmanagement.
Market ggsentiment gg- ggAnswer ggThe ggoverall ggattitude ggof gginvestors ggtowards gga
ggparticular ggsecurity ggor ggfinancial ggmarket.
Arbitraging ggprice ggdiscrepancies gg- ggAnswer ggThe ggpractice ggof ggtaking ggadvantage
ggof ggprice ggdifferences ggin ggdifferent ggmarkets ggto gggenerate ggprofit.
Default ggrate gg- ggAnswer ggThe ggpercentage ggof ggloans ggin gga ggportfolio ggthat ggare
ggexpected ggto ggdefault.
Interest ggrate ggenvironment gg- ggAnswer ggThe ggprevailing ggrates ggat ggwhich gginterest
ggis ggpaid ggby ggborrowers ggfor ggthe gguse ggof ggmoney ggthat ggthey ggborrow ggfrom
gglenders.
Liquidity ggrisk gg- ggAnswer ggThe ggrisk ggthat ggan ggentity ggwill ggnot ggbe ggable ggto
ggmeet ggits ggshort-term ggfinancial ggobligations ggdue ggto ggan gginability ggto ggconvert
ggassets gginto ggcash.
Credit ggrisk gg- ggAnswer ggThe ggrisk ggof ggloss ggdue ggto gga ggborrower's ggfailure ggto
ggmake ggpayments ggon ggany ggtype ggof ggdebt.
CLOS, AND LBOS QUESTIONS WITH
COMPLETE ANSWERS
In-kind ggexchange gg- ggAnswer ggAllows gginvestors ggto ggexchange ggETF ggshares ggfor
gga ggbasket ggof ggthe ggunderlying ggsecurities, ggrather ggthan ggcash, ggenabling ggtax
ggdeferral.
NAV gg- ggAnswer ggNet ggAsset ggValue, ggthe ggvalue ggof ggan ggETF's ggunderlying
ggassets ggper ggshare.
Authorized ggParticipants gg(APs) gg- ggAnswer ggEntities ggthat ggcreate ggand ggredeem
ggETF ggshares ggin ggthe ggprimary ggmarket, ggensuring ggthe ggETF's ggprice ggremains
ggclose ggto ggits ggNAV.
High-frequency ggtraders gg(HFTs) gg- ggAnswer ggTraders ggthat ggprovide ggliquidity ggin
ggthe ggETF ggmarket ggby ggarbitraging ggsmall ggprice ggdiscrepancies.
Expense ggratio gg- ggAnswer ggThe ggpercentage ggof ggassets ggused ggfor ggoperating
ggexpenses, ggexpressed ggas gga ggpercentage ggof ggthe ggtotal ggassets ggunder
ggmanagement.
In-kind ggredemptions gg- ggAnswer ggAllow ggApollo ggto ggexchange ggETF ggshares ggfor
gga ggbasket ggof ggunderlying ggsecurities gginstead ggof ggcash, ggavoiding ggcapital gggains.
Tracking ggerror gg- ggAnswer ggThe ggdeviation ggof ggan ggETF's ggperformance ggfrom ggits
ggbenchmark, ggindicating gghow ggclosely ggit ggreplicates ggthe ggbenchmark's
ggperformance.
Arbitrage ggmechanism gg- ggAnswer ggAllows ggAPs ggto ggcreate ggnew ggETF ggshares
ggwhen ggprices ggrise ggabove ggNAV ggand ggredeem ggthem ggwhen ggprices ggfall ggbelow
ggNAV.
Mezzanine ggtranches gg- ggAnswer ggRiskier ggsegments ggof ggCLO ggportfolios ggthat
ggabsorb gglosses ggafter ggequity ggtranches ggbut ggbefore ggsenior ggtranches.
, Expected gglosses gg- ggAnswer ggCalculated ggas ggthe ggproduct ggof ggthe ggportfolio
ggvalue ggand ggthe ggdefault ggrate.
Floating-rate ggstructure gg- ggAnswer ggLoans ggthat ggadjust ggtheir gginterest ggpayments
ggbased ggon gga ggbenchmark, ggmaking ggthem ggmore ggattractive ggin ggrising gginterest
ggrate ggenvironments.
Covenants gg- ggAnswer ggConditions ggplaced ggon ggborrowers ggto ggmaintain ggfinancial
gghealth, ggstabilizing ggloan ggpayments ggand ggreducing ggdefault gglikelihood.
Debt-to-EBITDA ggratio gg- ggAnswer ggA ggfinancial ggmetric ggcalculated ggby ggdividing
ggtotal ggdebt ggby ggEBITDA, ggindicating gga ggcompany's ggability ggto ggpay ggoff ggits
ggincurred ggdebt.
Middle-market ggloans gg- ggAnswer ggLoans ggthat ggoffer gghigher ggyields ggcompared ggto
gglarge ggcorporate ggloans, ggenhancing ggreturn ggpotential ggbut ggincreasing ggoverall
ggportfolio ggrisk.
Liquidity gg- ggAnswer ggThe ggability ggto ggquickly ggbuy ggor ggsell ggassets ggin ggthe
ggmarket ggwithout ggaffecting ggthe ggasset's ggprice.
Bid-ask ggspread gg- ggAnswer ggThe ggdifference ggbetween ggthe ggprice gga ggbuyer ggis
ggwilling ggto ggpay ggand ggthe ggprice gga ggseller ggis ggwilling ggto ggaccept.
Tracking ggerror ggof gg0.2% gg- ggAnswer ggIndicates ggthat ggthe ggETF's ggperformance ggis
ggvery ggclose ggto ggits ggbenchmark, ggshowing ggeffective ggmanagement.
Market ggsentiment gg- ggAnswer ggThe ggoverall ggattitude ggof gginvestors ggtowards gga
ggparticular ggsecurity ggor ggfinancial ggmarket.
Arbitraging ggprice ggdiscrepancies gg- ggAnswer ggThe ggpractice ggof ggtaking ggadvantage
ggof ggprice ggdifferences ggin ggdifferent ggmarkets ggto gggenerate ggprofit.
Default ggrate gg- ggAnswer ggThe ggpercentage ggof ggloans ggin gga ggportfolio ggthat ggare
ggexpected ggto ggdefault.
Interest ggrate ggenvironment gg- ggAnswer ggThe ggprevailing ggrates ggat ggwhich gginterest
ggis ggpaid ggby ggborrowers ggfor ggthe gguse ggof ggmoney ggthat ggthey ggborrow ggfrom
gglenders.
Liquidity ggrisk gg- ggAnswer ggThe ggrisk ggthat ggan ggentity ggwill ggnot ggbe ggable ggto
ggmeet ggits ggshort-term ggfinancial ggobligations ggdue ggto ggan gginability ggto ggconvert
ggassets gginto ggcash.
Credit ggrisk gg- ggAnswer ggThe ggrisk ggof ggloss ggdue ggto gga ggborrower's ggfailure ggto
ggmake ggpayments ggon ggany ggtype ggof ggdebt.
