I develop a dynamic general equilibrium model of exchange traded funds (ETFs) that accounts for the two-tier ETF market structure with both a centralized exchange (secondary market) and a creation/redemption mechanism (primary market) operating through market-making firms known as Authorized...

We study arbitrage in ETFs holding illiquid corporate bonds, focusing on authorized participants (APs) and their balance sheet space constraints. As unique ETF arbitrageurs, most APs are also bond dealers, and they use their own balance sheet in both roles. We find that bond market illiquidity...

This paper studies relative price gaps between pairs of nearly identical Exchange-Traded Funds (ETFs) listed on US exchanges. Prices usually move in lockstep, but sometimes diverge from parity by larger amounts. Over the period 2010-2016, a simple pairs trading strategy produced abnormal returns...