Exam ICWIM Topic 1 Question 9 Discussion

Actual exam question for CISI's ICWIM exam
Question #: 9
Topic #: 1
How do passive fund managers use swaps to replicate an index?

Suggested Answer: D Vote an answer

Passive fund managers can use synthetic replication to track an index through derivatives like swaps. In this arrangement, the fund agrees to pay a pre-defined return (e.g., LIBOR or a fixed rate) to a counterparty in exchange for the counterparty delivering the total return of the index. This approach allows the fund to replicate index performance without holding the physical securities, reducing costs and eliminating tracking error.

by Eric at Jan 09, 2026, 03:43 AM

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