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Glossary

Terms7 shown

Volatility DecayRefers to leveraged tokens and leverage ETF The erosion of returns in volatile or range-bound markets caused by the combined effects of daily rebalancing and compounding, also known as beta slippage or volatility drag.
beta slippageAnother term for Volatility Decay, describing the deviation and loss in returns caused by daily leverage resets and compounding in volatile markets.
volatility dragAnother term for volatility drag, referring to the drag that volatility imposes on cumulative returns through the compounding effect.
Compound interestCompound interest is a method of calculation in which previously earned interest is added to the principal, allowing that interest to continue earning interest in subsequent interest-calculation periods.
Annualized return (APY)An effective annualized return metric normalized over time and incorporating the effects of compounding.
Volatility decayDue to daily resets and the effects of compounding, leveraged ETF may be gradually eroded over multiple days in volatile or sideways markets.
Volatility decayLeveraged or inverse ETF A phenomenon in which daily resets and compounding effects may cause long-term returns in volatile markets to gradually deviate from the expected multiple.

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Definition

Volatility Decay

Refers to leveraged tokens and leverage ETF The erosion of returns in volatile or range-bound markets caused by the combined effects of daily rebalancing and compounding, also known as beta slippage or volatility drag.

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