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If I'm not mistaken balancing means to distribute something (resources) equally among several options. So let's say I have options a, b and c, and 9 coins, I balance my coins and assign: a:3, b:3, c:3.

Leverage means to use a little amount of resources to obtain a greater amount of those resources. Let's say I have 9 coins again and the expected profit of a, b and c is a:10/1, b:10/3, c:5/1. In this case I'll choose to put my 9 coins on a, because I can leverage up to 90 (it would be 30 for b and 45 for c).

So far so good. Now there are two alternative explanations for what I'm searching for:

  1. Now let's say that a, b and c have some admittance or a maximum number of coins that can be assigned before becoming ineffective. These numbers can be a:2, b:8, c:4. In this case we will obviously make the following assignment: a:2, b:3, c:4. This is not so clear when there is not a hard number where assignments become ineffective but slopes that can be more or less steep. Therefore this would require an assignment of the resources that doesn't balance among the options and does not leverage, since the multiplier factor was lost.
  2. Alternatively let's say a, b and c have different risks, more profitability means a higher risk. So we want to balance profitability with exposure to risk, and we don't want to leverage or balance our investment but to do something different (that's the word I'm looking for), let's say that considering the risks (which I don't state, imagine we are making the decision right according to some rules) we assign: a:2, b:6, c:1.

In this case we are not balancing and I would say we are not leveraging, but assigning the coins to resources a, b and c in a different way. I'm searching for such a word. I hope it exists.

Sorry if I'm not clear, it's a quite specific concept that arises in a fairly specific context, please ask if there is something that needs clarification.

Thank you very much.

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1  
Are you looking for "diversification"? –  user16269 Jul 21 '12 at 12:17
    
Calculated gamble, spread betting etc. are what come to mind. But I doubt that they fit your requirements. –  coleopterist Jul 21 '12 at 13:46
    
Leverage does not mean investing a small amount of resources to gain a profit. It means using a small amount of resources to get control of a larger amount of resources, which you then invest. One way to do this is to borrow the money to buy the larger investment. The term makes an analogy with levers, which multiply the force exerted at one end in order to lift a larger weight than you could lift on your own. See here and here. –  Ben Kovitz Jun 11 at 3:01

2 Answers 2

up vote 4 down vote accepted

This is a commonly studied strategy in mathematical finance (see for instance here), but I don't believe there is a general term for it. There are all sorts of terms for specific strategies that fall between leveraging and balancing—for example, the strategy the above link discusses is called Kelly betting or proportional betting.

I believe the general term portfolio balancing in finance is used for strategies that are much more general than evenly balanced portfolios, as in your example, and so include some leveraging.

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In your second explanation, it sounds like you're describing hedging.

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