This question may sound simple, but I'm not sure about this and would like to ask for your help...
Suppose that portfolio has 1000 dollars in cash and is long 1000 shares of JPM with the price $42 and long 500 shares of MSFT at $33.50. What is the gross and net leverage of portfolio?
Thanks.
On the Internet I found that
gross leverage = (longs + absolute value of shorts)/portfolio equity
net leverage = (longs + shorts)/portfolio equity
Since longs is 42*1000+33.50*500 = 58750, I think that gross leverage and net leverage are the same: 58750/(58750+10000) = 0.85.
What do you think?
P.S.: There is a typo in my first post: cash is actually $10,000, not $1,000.