The leverage ratio is actually easy to calculate. Graded funds are generally divided into stable shares and active shares. Suppose the ratio of the two is 4: 6, and the initial leverage ratio is (4+6)/6= 1.67 times.

Premium means the emergence of arbitrage opportunities, that is, the price of the parent fund (OTC, equivalent to stable share+active share) is lower than that of the dual fund (OTC, 1 stable share+1 active share). There will be arbitrage funds to buy the parent fund from the OTC market, and then split it out to sell arbitrage on the market, which will dilute the original fund income.

Do you basically understand?

Of course, arbitrage can also be discounted arbitrage, that is, buying from the market and selling from the market after merger.