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Leverage

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The use of debt financing, or property of rising or falling at a proportionally greater amount than comparable investments. For example, an option is said to have high leverage compared to the underlying stock because a given price change in the stock may result in a greater increase or decrease in the value of the option. Also, commonly known as Gearing in Europe.

Copyright © 2005, Campbell R. Harvey. All Worldwide Rights Reserved. Do not reproduce without explicit permission.

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