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In finance, leverage, also known as gearing, is any technique involving borrowing funds to buy an investment. Financial leverage is named after a lever in physics, which amplifies a small input force into a greater output force, because successful leverage amplifies the smaller amounts of money needed for borrowing into large amounts of profit.
While corporate acquisitions often employ leverage to finance the purchase of the target, the term "leveraged buyout" is typically only employed when the acquiror is a financial sponsor (a private equity investment firm).
Leveraged recapitalizations are used by privately held companies as a means of refinancing, generally to provide cash to the shareholders while not requiring a total sale of the company. Debt (in the form of bonds) has some advantages over equity as a way of raising money, since it can have tax benefits and can enforce a cash discipline.
The reason why leveraged ETFs don’t necessarily double over time is because their returns are a function of their debt-to-equity ratios, meaning these funds must rebalance their portfolios at ...
A callable bull/bear contract, or CBBC in short form, is a derivative financial instrument that provides investors with a leveraged investment in underlying assets, which can be a single stock, or an index. CBBC is usually issued by third parties, mostly investment banks, but neither by stock exchanges nor by asset owners. It was first ...
An inverse exchange-traded fund is an exchange-traded fund (ETF), traded on a public stock market, which is designed to perform as the inverse of whatever index or benchmark it is designed to track. These funds work by using short selling, trading derivatives such as futures contracts, and other leveraged investment techniques.
Stocks look better than the economy: Analysts expect the U.S. stock market could outperform the U.S. economy, thanks largely due to positive operating leverage. Since the pandemic, companies have ...
The leveraged finance markets came to a near standstill during a week in 2007. [96] As 2008 began, lending standards tightened and the era of "mega-buyouts" came to an end. Nevertheless, private equity continues to be a large and active asset class and the private-equity firms, with hundreds of billions of dollars of committed capital from ...