> One example of this is NAV trading (Jane Street has a paper here), where an investor wants to place a large trade in an ETF and agrees to buy it at some future point at whatever its net asset value is, less some small fee.
Should this say "agrees to buy it at some future point at whatever its net asset value is *NOW*"? Otherwise, I'm confused, why wouldn't the investor just buy it later?
I think they mean that the buyer will agree to pay $5000 now for say 10 shares (close to current valuation), and get it in a week regardless if they will be worth $0, $5000 or $100000 at that point. They would prefer to buy it now, but can't, and thus are willing to pay a fee to make it happen.
However, the motivation (and pricing) is different from futures trading: here the buyer would prefer to buy the asset immediately, but because of market inefficiencies or unavailability it's not possible. So some dealer figures he can make that happen in a week, takes a small fee, and agrees to the trade. In the meantime, the dealer might want to buy something that correlates with the value of the actual asset to cover his bet -- e.g. they might be able to buy most of the stocks in the ETF in roughly the same amounts, and just accept the remaining risk.
There is however a chance that they will not be able to complete the transaction.
https://www.janestreet.com/wp-content/themes/janestreet/pdf/...