Gearing

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Gearing

Concept of Gearing in the context of derivatives contract, by the International Swaps and Derivatives Association (ISDA): The characteristic of derivatives which enables a far greater reward (or loss) for the same, or much smaller, initial outlay. It is the ratio of exposure to investment outlay; for example an investment of $1 gives an exposure equivalent to a $10 investment and hence a gearing of 10.

Resources

See Also

• Derivatives Contract