Triple-leveraged etfs

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Reference no: EM133071625

Triple-leveraged ETFs

Underlying unlevered ETF demonstrated the following path over a four day period:

Day

0

1

2

3

4

Price

100

110

100

90

100

Assuming risk-free rate of interest of zero for both lending and borrowing.

a. You are managing a 3X leverage ETF that targets 3 times the daily return of the underlying index. If the starting with a price of 100, what is the daily price?

Day

0

1

2

3

4

Price

100

 

 

 

 

b. You are managing a 3X leverage ETF that targets 3 times the daily return of the underlying index. If the starting with a price of 100, what is the daily position in the un-levered ETF and cash?

Day

0

1

2

3

4

Position in unlevered ETF

300

 

 

 

 

Position in cash

-200

 

 

 

 

Day

0

1

2

3

4

Rebal Trade in ETF

 

 

 

 

 

Change in Cash

 

 

 

 

 

Reference no: EM133071625

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