Target Leverage Ratio

The target leverage ratio is the intended level of debt relative to equity that a leveraged financial product aims to maintain. It is the core parameter for leveraged tokens and constant-leverage products.

By keeping this ratio fixed, the product provides predictable exposure to the underlying asset's performance. However, maintaining this target requires constant rebalancing, which introduces the risk of decay.

Investors must understand the target ratio to accurately forecast potential gains and losses. It is a defining feature of structured derivative products in both traditional and digital markets.