Risk & Portfolio Management
2 terms
Leverage
Risk & Portfolio Management
ratio (x, times)
The use of borrowed capital to increase the size of a position relative to the money committed.
Leverage = Total Position Value / Own Capital Committed
Liquidity Risk
Risk & Portfolio Management
qualitative
The risk of being unable to exit a position at a reasonable price, or at all, when required.
Test: the position size is large relative to normal traded volume, or the security can become untradable under stress