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Quantitative Finance · Glossary

What is Basis-trade leverage?

Definition 11.1 Strategies II: Volatility, Relative Value, Macro and the Bank Desks · Chapter 11 — The Bond-Futures Basis Trade

Basis-trade leverage is the face value of bonds held long (and futures short) per unit of the trader’s capital; it is capped by the collateral the trade needs, so at most one divided by the repo haircut plus the futures margin (per unit of face), and it falls when either rises.

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