how to calculate risk exposure with leverage

Discussion in 'Trading' started by mags29464, Dec 31, 2012.

  1. How do you account for leverage when you calculate the risk exposure of a stock (or bond)?
  2. 1245


    Try shocking your portfolio the way the OCC does(stocks).

    Equities +\- 15%
    narrow indexes +\- 10%
    broad based indexes +6%\-8%

    do it by underlying and add up the shocks. Then determine if there were a one day move of that amount, what is the most your willing to lose.
  3. Nah, thats not really what im looking for because it doesn't include the cost of leverage and buying power leverage gives you.
  4. 1245


    I'm not sure what you mean by "cost of leverage."
  5. When you borrow money there is a cost included..
  6. 1245


    OK, now I understand. If you have a retail account, the interest can range today from around 1.5% to 7%. Only you will know what you pay.