Think about coming dwelling and opening your fridge to discover a jar filled with your favourite juice. After taking a sip, you notice that the benevolent soul who ready the juice has added an excessive amount of water and there’s little you are able to do about it. Eradicating water from juice is a sophisticated course of. Nonetheless, if as a substitute the juicer was too water-sparse, you may merely dilute the juice with additional water and benefit from the excellent refreshing drink.
The same phenomenon happens with the chance of economic property. If an asset is simply too low danger, it’s tough to “take the water out” and make it extra dangerous, often by means of leverage. Quite the opposite, if the asset is simply too dangerous, it’s easy to dilute it with money equivalents, comparable to short-term treasury payments or treasury payments.
João Marco Braga da Cunha is the portfolio supervisor at Hashdex. He obtained a Grasp of Science in Economics from the Fundação Getulio Vargas earlier than acquiring a doctorate in Electrical and Digital Engineering from the Pontifical Catholic College of Rio de Janeiro.
Proceed studying on Coin Telegraph
