Effective Leverage

Effective Leverage measures how much exposure to the underlying token’s price movements a Leveraged Position represents at the current time.

At Initialization / Rebalance:

$$\text{Target Leverage} = \text{Effective Leverage} = \frac{\text{Underlying Token Value}}{\text{Leveraged Vault Value}}$$

Afterwards (dynamic):

$$\text{Effective Leverage} = \frac{\text{Underlying Token Value}}{\text{Leveraged Position Value}}$$

This ratio adjusts over time as the price of the underlying token changes, showing how leverage drifts away from the initial setting until the next rebalance.