Definition
Using borrowing or derivatives to create exposure larger than the capital committed.
Hypothetical example
Invest 200 using 100 of equity and 100 of debt. A 10% asset decline leaves 80 of equity, a 20% loss before costs.
Keep in mind
Losses, interest costs and forced liquidation risks can increase. Some structures permit losses beyond the original capital.
Official reference
www.finra.org ↗Examples are illustrative assumptions, not investment recommendations.