Leverage is a centrepiece of risk discussions among hedge fund stakeholders, including regulators. Unfortunately, this focus on leverage does not substantively aid risk assessment or risk management. The extent to which it may be useful to focus on leverage in risk assessment depends heavily on the context. Even where leverage might be a relevant indication of risk, an unbridgeable chasm separates the idea of leverage and how we measure it in practice.
On a purely conceptual level, leverag