Exchange-Traded Note (ETN)

An Exchange-Traded Note (ETN) is a debt security issued by a financial institution that tracks the performance of a specific market index, commodity, or other benchmark. Unlike ETFs, ETNs do not hold actual assets; instead, they promise to pay investors the returns of the underlying index or asset minus fees. ETNs are traded on major exchanges and offer investors exposure to hard-to-access markets, such as commodities or specific investment strategies. However, ETNs carry credit risk since their value depends on the issuer’s ability to pay, making them subject to the financial health of the issuing institution.

Example

An ETN that tracks the performance of the VIX, a volatility index, provides investors exposure to market volatility without directly holding any related assets.