Leverage, Margn-to-Equity ratio, Risk Measures 4 MACRO Fund

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Leverage, Margn-to-Equity ratio, Risk Measures 4 MACRO Fund

Post by CPTRADER » Mon Aug 15, 2005 12:47 pm

Hello Friends,

What are your views on the use of leverage factor an/or Margin-to-Equity ratio for Macro funds trading in futures, forex, and FX/

Is one preferred to the other? Is one more accurate than the other?

Is there a consistent way to calculate leverage?

For example in calculating notional value for bond futures or 10-Y futures, what's the correct way? Multiplying position size by the bond’s US$100,000 face value?? And since all the interest rate contract shave 100,000 face value, isn’t this I sa somewhat misleading way of calculating interest rate contract notional value. Is there a precise /accurate way of calculating notional value of interest rate contracts/

Also in calculating total portfolio notional value in order to get a leverage factor, do you raw position values or absolute position values?

For example if you are short 2 NQU and long 1 ESU, would this for leverage purposes be roughly a flat position [(-2*1600*20) +( 1*50*1230) ] or do you use the absolute notional value for each individual component i.e. [(2*1600*20) +( 1*50*1230) ]?

I would love to hear peoples views/comments/answers to the above and genral comments on assessing risk exposure in a portfolio.

Many thanks in advance!

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