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Retail Investing · Mutual Funds & SIPs

ETF Pricing and Tracking

NAV, iNAV and market price alignment, premiums, discounts and tracking measures.

ETF Pricing and Tracking is taught as investor education, not a recommendation. Use the mandate, current disclosures and your own horizon; regulatory facts are stated as of 4 Aug 2026.

  • Retail Investing
  • Easy level
  • 3 concepts
  • 5 practice questions

2Premium and discount

Price above NAV is a premium and price below NAV is a discount; measure the gap relative to NAV at comparable timestamps.

A premium can reflect stale iNAV, closed underlying markets, order imbalance or impaired arbitrage rather than free value.

Figure. Read the rails as separate decision lenses; no label alone determines return, risk, or tax.

Premium and discount
LensWhat to read
PremiumPrice above comparable NAV
DiscountPrice below comparable NAV
CautionSynchronise timestamps
An ETF at 101 versus comparable NAV 100 trades at
  1. About a 1% premium
  2. A 1% discount
  3. Zero spread by definition

(101−100)/100 is 1%.

3Tracking difference and tracking error

Tracking difference is the realised return gap versus the benchmark; tracking error is the variability of periodic gaps.

Expenses, sampling, cash, taxes, execution and index changes can affect both, while trading spread is a separate investor-level friction.

Animation: benchmark and ETF paths draw together while gold connectors mark the changing return gap; the foot labels difference versus error
Difference is the realised gap; error is how that gap varies along the path.
Tracking difference and tracking error
LensWhat to read
DifferenceFund return minus benchmark
ErrorVariability of periodic gaps
TradingSpread is a separate friction
Tracking error is
  1. Variability of periodic return gaps
  2. The average gap only
  3. The bid-ask spread

Use difference and error as distinct measures.

Notes

  • NAV is the fund's per-unit net asset value; iNAV is an indicative intraday estimate where published; market price is the executable exchange quote.
  • Price above NAV is a premium and price below NAV is a discount; measure the gap relative to NAV at comparable timestamps.
  • Tracking difference is the realised return gap versus the benchmark; tracking error is the variability of periodic gaps.

Formulas

  • Category name ≠ economic exposure ≠ tax classification
  • Read mandate + portfolio + costs + liquidity

Exam traps & shortcuts

  • Separate the product wrapper, investment strategy and tax classification.
  • Treat every dated regulatory fact as reviewable, not permanent.

Reference tables

Use this map before comparing scheme names or trailing returns.

ETF Pricing and Tracking: reading map
ConceptPrimary question
NAV, iNAV and traded priceOfficial per-unit portfolio value
Premium and discountPrice above comparable NAV
Tracking difference and tracking errorFund return minus benchmark

Recap

Keep the axes separate and re-check dated documents.

NAV, iNAV and traded price
NAV is the fund's per-unit net asset value; iNAV is an indicative intraday estimate where published; market price is the executable exchange quote.
Premium and discount
Price above NAV is a premium and price below NAV is a discount; measure the gap relative to NAV at comparable timestamps.
Tracking difference and tracking error
Tracking difference is the realised return gap versus the benchmark; tracking error is the variability of periodic gaps.

Practise ETF Pricing and Tracking

Reading is free and needs no account. Practice, mocks and progress live in the app.

  • 5 exam-style questions on this topic, with explanations
  • A 3-question practice set that ends the chapter
  • Timed mocks scored with the real marking scheme
  • Readiness tracked per topic, kept on your device
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