The essence of leveraged ETF is to ensure that ETF holders enjoy a fixed target multiple of the underlying asset's daily returns by fixing the returns of leveraged funds. The fixed leverage Fund is managed by the Platform or a fund manager approved by the Platform. ZKE platform publishes the net value of the fund in real-time to maintain a high degree of transparency.
In theory, the net value of the fund is the fair trading price of ETF shares in the secondary market. But because of continued market volatility, the net value of the fund is the fair trading price of ETF shares in the secondary market. However, due to the continued volatility of the market, there may be a deviation from the fair price (net value of the fund) in the secondary market at some time, resulting in a certain premium.
When the premium exists, there will be arbitrage opportunities. Arbitrageurs in the secondary market can gradually eliminate the premium through arbitrage operations to ensure that the trading price of the token follows the fair price. Ordinary users, should pay attention to their order price do not deviate too much from the net value, otherwise, they will suffer great losses. At the same time, when the net price is lower than a certain threshold (0.1U at the initial stage), the platform will merge the varieties (the net price will become 10 times that before the merger, but the corresponding quantity will also become 1/10 of that before the merger, and the total assets of users will not be affected in any way) to improve the sensitivity of price changes and optimize the trading experience of users.
Take one day as a period (UTC16:00 to the next day UTC16:00), and the final moment of the k period is denoted as t,k = 0,1,2,.... to is equal to 0. Let the initial net value of the unit fund be 100USDT, that is, S(0) = 100USDT
. S(0): initial value of the fund;
. S(t): the net value of the fund at time t, t > 0;
. P(0): the price of the underlying asset at the initial moment;
. P(t): the price of the underlying asset at time t:
. M: Target leverage multiple, we can choose 2, 3, -1, -2, -3
The return rate of the fund and the underlying asset in the k period are respectively
R,(k) = S(t) - S(t-1)Rp(k) = P(t) - P(t-1)S(tk-1)P(tk-1)
The goal of a fixed leveraged fund is to make its return rate of each period M times the return rate of the underlying asset, namely R,(k) = M x B,(k), k = 1,2.
A fixed-leverage fund is essentially an actively managed fund that anchors its return over each cycle to M times the return on the underlying asset. Fund positions at the beginning of each cycle must adjust as the price of the underlying asset changes to ensure this is achieved. Position adjustment is mainly based on the net value of the fund at the beginning of each cycle to adjust the position so that the risk of this cycle is open and anchored M times the risk exposure of the corresponding underlying asset. If the net value at the beginning of the period is S(tk), the exposure set at the beginning of the period is an equivalent USDT position of M * S(tk).