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Quantitative Finance · Glossary

What is Leveraged ETF?

Definition 14.9 Markets I: The Ecosystem and Exchange-Traded Markets · Chapter 14 — Exchange-Traded Funds

A leveraged ETF with factor β\beta promises β\beta times the daily return of an index, before fees; an inverse ETF has β<0\beta < 0. It obtains the exposure with swaps and futures and resets it at each close.

Exposure a fund must buy at the close after a +1\% day, as a percentage of its net assets: ( -1). Inverse funds trade more than leveraged funds of the same magnitude, and in the same direction. Data: .
Figure 14.4. Exposure a fund must buy at the close after a +1%+1\% day, as a percentage of its net assets: β(β−1)\beta(\beta-1). Inverse funds trade more than leveraged funds of the same magnitude, and in the same direction. Data: Proposition 14.10.
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