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Valmira Hoxhaj

Oakland University



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Ravindra Khattree

Oakland University



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504 – Risk, Prediction, and Financial Econometrics

Exchange Traded Funds with Variable Leverage

Sponsor: Business and Economic Statistics Section
Keywords: Leverage Exhange Traded Funds, Simulations

Valmira Hoxhaj

Oakland University

Ravindra Khattree

Oakland University

In this article we introduce the concept of an leveraged exchange traded fund where leverage is a random variable, rather than a constant. This allows one to have more control on hedging demand ratio and it reduces the volatility of the fund. Simulations are used to study the performance of such funds and to compare them with the corresponding constant leveraged funds.

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