Analysis of Net Value Estimation Error for Silver LOF: A Case Study on Differences Between Settlement Price and Closing Price

Listed Open-End Funds (LOF) have unique technical characteristics in their net value estimation mechanism:

[0]. This dual pricing system creates potential deviation space between “estimated net value” and “actual net value”.

usually include:

• Deriving based on real-time market prices of the fund’s portfolio holdings
• Using the latest futures contract prices as core parameters for precious metal funds
• Considering adjustment factors such as exchange rates, holding proportions, and fee deductions

is a weighted average price calculated by the exchange using a specific algorithm, with core characteristics including [1]:

Feature	Settlement Price	Closing Price
Calculation Method	Volume-weighted average over the entire trading period	Last matched transaction price
Time Range	Entire trading session	Closing moment
Purpose	Margin calculation, profit and loss settlement	Price marking
Representativeness	Reflects the average trading level throughout the day	May be affected by late-session fluctuations

For silver futures, the

uses the daily settlement price as the benchmark for the average trading price of the day, while the only represents the transaction price of the last trade.

The main source of net value estimation error for Silver LOF is

[2]:

1. Intraday estimation time point
   : Usually uses the previous trading day’s settlement price or the current day’s latest price
2. Actual net value confirmation time point
   : Reviewed by the fund custodian after market close on day T
3. Futures settlement price announcement time point
   : Usually between 15:00-15:30 after closing

This time difference means intraday estimation cannot use the day’s final settlement price, forming inherent information lag.

(hypothetical scenario):

Portfolio composition of a Silver LOF fund:
- Long position in silver futures main contract: 80%
- Cash and cash equivalents: 20%

Market data on day T:
- Silver futures closing price: 7,500 CNY/kg
- Silver futures settlement price: 7,450 CNY/kg  
- Difference rate: (7,500-7,450)/7,450 = 0.67%

Estimated net value based on closing price: 1.025 CNY
Actual net value based on settlement price: 1.018 CNY
Estimation error: +0.69%

Impact Factor	Impact Direction	Impact Degree
Futures contract rollover	Positive/negative deviation	High (during contract switching)
Market volatility	Expands deviation	High (greater volatility leads to larger differences)
Late-session anomalies	Uncertain direction	Medium
Liquidity conditions	Expands deviation	Medium (when liquidity is low)
Exchange rate fluctuations	Superimposed effect	Medium

Differences between settlement prices and closing prices create theoretical space for

[3]:

• Positive arbitrage
  : When the estimated net value is significantly higher than the actual net value, buying on-exchange may yield additional returns
• Reverse arbitrage
  : The opposite applies
• Risk reminder
  : Arbitrage needs to consider transaction costs, time delays, execution risks, etc.

1. Focus on estimation accuracy
   : Choose platforms that use more precise estimation methods
2. Understand time windows
   : Recognize the time difference between intraday valuation and actual net value
3. Verify large transactions
   : For large subscriptions/redemptions, it is recommended to rely on the actual net value
4. Be cautious in volatile markets
   : Estimation errors may expand during periods of severe market volatility

Recommended estimation formula:
Estimated net value = Σ (latest price of holding instruments × holding weight) × (1 - fee rate)
          + cash balance / total shares

Improvements:
1. Use estimated futures settlement prices (based on intraday volume-price relationships)
2. Consider the impact of rollover factors on contract prices
3. Add liquidity discount factors

• Short-term traders
  : Focus on intraday price fluctuations rather than estimated net value
• Long-term holders
  : Focus on actual net value performance and ignore short-term estimation deviations
• Arbitrage participants
  : Establish error monitoring models and set reasonable deviation thresholds

The net value estimation error for Silver LOF is essentially an

, stemming from differences in calculation methods between futures settlement prices and closing prices, as well as information release time lags. Understanding this mechanism helps investors:

1. More rationally view fluctuations in intraday valuations
2. Identify potential investment opportunities and risks
3. Choose reference indicators more suitable for their own trading strategies

With advancements in market data service technology, estimation accuracy is expected to continue improving in the future, but completely eliminating errors has objective technical limitations.

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[0] Analysis of LOF Fund Operation Mechanism and Pricing Principles (Theories related to financial product design)

[1] Research on Futures Settlement Price Calculation Methods and Market Functions (Shanghai Futures Exchange Rules and Financial Engineering Theories)

[2] Net Value Estimation Methodology for Precious Metal ETFs/LOFs (Fund Valuation Technology and Practice)

[3] Cross-Market Arbitrage and Price Discovery Mechanisms (Theories on Price Relationships in Financial Markets)