Constant Leverage Certificate — Long
A fixed multiple of the daily return of the underlying, reset every day.
Payoff at maturity
Move the parameters; the product formula and its building blocks are recomputed from the same engine that is tested against the workbook.
Shown as an approximation. The product is re-levered daily, so its value over more than one day depends on the whole path; the single-step line is not a payoff at maturity.
- Single-period approximation (one rebalancing step)
Value 100 %
Per 10'000 of nominal
| Underlying at maturity | Level | Value | Amount | Gain / loss |
|---|---|---|---|---|
| −30 % | 70 % | 0 % | 0 | −10'000 |
| unchanged | 100 % | 100 % | 10'000 | +0 |
| +30 % | 130 % | 220 % | 22'000 | +12'000 |
For leverage products the nominal stands for the initial underlying level; the amount is the value of a position that controlled 10,000 of underlying at the start. Premium, financing and time value are not included. Scenario: Single-period approximation (one rebalancing step).
Data table and formulas
Constant Leverage Certificate - Long (2300), scenario "Single-period approximation (one rebalancing step)": value per unit at maturity for an underlying at 0 % → 0 %; 4 % → 0 %; 100 % → 100 %; 200 % → 500 % of its initial level.
| Series | Formula | 0 % | 25 % | 50 % | 75 % | 100 % | 125 % | 150 % | 175 % | 200 % |
|---|---|---|---|---|---|---|---|---|---|---|
| Leverage x Long Underlying | leverage × S | 0 | 100 | 200 | 300 | 400 | 500 | 600 | 700 | 800 |
| x Short Zero Bond | −(leverage − 1) × 100 | -300 | -300 | -300 | -300 | -300 | -300 | -300 | -300 | -300 |
| Intraday Reset / Adjustment Mechanism | max(−(100 + leverage × (S − 100)), 0) | 300 | 200 | 100 | 0 | 0 | 0 | 0 | 0 | 0 |
| Product | max(100 + leverage × (S − 100), 0) | 0 | 0 | 0 | 0 | 100 | 200 | 300 | 400 | 500 |
Largest difference between the sum of the blocks and the product formula over the grid: 0.0e+0.
How it is built
Each block drawn on its own, then added. The last chart is the sum, and it is identical to the product line above.
- Leverage x Long Underlyingleverage × S
- x Short Zero Bond−(leverage − 1) × 100
- Intraday Reset / Adjustment Mechanismmax(−(100 + leverage × (S − 100)), 0)
- Product: single-period approximation (one rebalancing step)max(100 + leverage × (S − 100), 0)
Largest gap between the sum of the blocks and the product formula on this grid: 0.0e+0. The same identity is tested for every product and scenario in the site's test suite.
Construction, as listed in the workbook
- Leverage x Long Underlying (rebalanced daily)
- (Leverage - 1) x Short Zero Bond (daily financing)
- Intraday Reset / Adjustment Mechanism (floor at zero)
- Note: no static replication exists - the exposure is re-levered every day; the chart is an approximation (see Notes)
In plain English
Each day the certificate earns the leverage factor times the daily return of the underlying, minus financing. The exposure is re-levered every evening, so the leverage is always the same at the start of the day. An intraday reset threshold protects against a total loss within a day.
Because the exposure is rebuilt daily, the result over several days depends on the path, not just on the end point. In a trend the compounding helps; in a choppy sideways market it erodes value, since every reversal is levered from a new base. The chart is a single-step approximation, plus one two-step path to show the difference. There is no static replication of this product.
Chances and risks
Chances
- Constant, known leverage every day.
- No knock-out.
- Compounding helps in a steady trend.
Risks
- Path dependency: volatile sideways markets erode value even if the underlying ends flat.
- Daily financing costs.
- Issuer credit risk.
Who it fits
- Short-term traders who expect a steady trend and monitor daily.
Who it does not fit
- Anyone holding through a volatile, directionless period.
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