@zaraleacock

For institutional portfolios, setting leverage caps requires factor exposure analysis. Assets are decomposed into sensitivities to market beta, momentum, and volatility. If a token shows excessive volatility beta, its allowable leverage should be lower to prevent amplified drawdowns. Correlation-adjusted exposures ensure portfolio-level leverage does not compound systemic risk. Stress testing scenarios like liquidity shocks or regulatory bans inform conservative limits. Dynamic adjustment of leverage caps as factor loadings shift maintains portfolio resilience. This disciplined approach prevents unchecked risk buildup and aligns leverage with institutional risk mandates and investor tolerance.

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