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Financial Asset management

 

Does leveraging the asset make good sense?

Created by : Satyanarayana Naidu, Sr. Associate, IDBI Bank  | 11 29 2008 11:44:01 +0000
Industry : Asset ManagementFunctional Area : Capital Management(Corporate Finance)
Keywords : Asset Leverage Sense Leveraging
Activity:  176 views;  last activity : 07 06 2010 20:18:09 +0000
If the variance of returns for that asset is low and it is exceedingly unlikely that one will be forced to sell at a loss can leveraging be considered risky relative to not leveraging?
  
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Leveraging any asset would of course magnify the returns on equity but would bring in more risk also. So, it depends on the risk appetite of the borrower. It also depends on the class of asset that you want to leverage. Leveraging is always good but should be done tactfully; leveraging a volatile asset is safer vis-a-vis non-volatile asset.
By Satyanarayana Naidu, Sr. Associate, IDBI Bank  | 11 29 2008 11:44:01 +0000
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The risk of adding leverage should be measured against some of the alternatives. Levering your portfolio is more "risky". Leveraging a non-volatile instrument is riskier.
By Rohini Sondkar, Investment Advisor, Kotak Mahindra  | 11 29 2008 11:45:35 +0000
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