Beware the use of leverage in turbulent and volatile markets


Hedge funds are becoming increasingly limited in their use of leverage by the willingness of creditors to provide the needed liquidity.

Leverage is optimal if managers identify the right opportunities for making the bet. "[Leverage] increases exposures to the desired price direction either by buying long or selling short and is therefore risky, particularly if the bet went wrong," says Daniel Chi-Hsiou Hung, lecturer in finance at Durham University's Business School.

Explicit leverage is easily mo

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