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Working Paper
Embedded Leverage
November 1, 2012
Embedded leverage—the amount of market exposure per unit of committed capital—has become an important feature of financial instruments. We study embedded leverage in equity options, index options and ETFs, and how it affects the required returns.
Book
Monitoring Leverage
September 30, 2013
While the interest rate has been regarded as the single key feature of a loan, we argue that leverage is a more important measure of systemic risk. We discuss how leverage can be monitored, and highlight the benefits of doing so.
Journal Article
Leveraged Exchange-Traded Funds: Admissible Leverage and Risk Horizon
December 18, 2012
In view of the increasing popularity of exchange-traded funds and their leveraged counterparts, the authors assert that it is important for investors to better evaluate the risk involved.
Journal Article
Leverage Aversion and Risk Parity
January 1, 2012
In recent years, a new approach to asset allocation called risk parity (RP) has been gaining in popularity among practitioners.
Perspective
Yes, Lever, but With Care
February 13, 2015
Conventional wisdom holds that sensible investors avoid leverage. Cliff Asness argues that, if prudently employed, portfolio leverage can be beneficial in modest doses, with proper concern for its dangers.
Structural GARCH: The Volatility-Leverage Connection
2014 HONORABLE MENTION Robert Engle, Ph.D., and Emil Siriwardane
Perspective
Risk Parity: Why We Lever
September 24, 2014
The role of leverage in risk parity is often misunderstood. For risk parity investors, there may be benefits to using modest leverage—it helps them build a more diversified, more balanced, and potentially higher-return-for-the-risk-taken portfolio.
Alternative Thinking
Why Do Most Investors Choose Concentration Over Leverage?
2Q 2012
Return-seeking investors must take risks—the question is which to take and to understand the tradeoffs involved. Most investors choose concentration risk, but we present arguments for a different approach.
Leverage Constraints and Asset Prices: Insights from Mutual Fund Risk Taking
2015 HONORABLE MENTION Oliver Boguth, Ph.D., and Mikhail Simutin, Ph.D.
Journal Article
The Pitfalls of Leveraged and Inverse ETFs
May 1, 2009
As market volatility reaches historic highs, investors have responded in various ways, including investing in funds that aim to deliver returns that are either a positive or inverse multiple of a stated index.