This study confirmed whether the rate of derivatives in leveraged exchange-traded funds (ETF) calculated by derivatives and net asset value (NAV) affect their tracking errors. This research established three findings. First, when the rate of derivatives was limited at 100%, the tracking error of the leveraged ETF targeted on 2 times of the index was affected by the rate of derivatives. Second, when the rate of derivatives was eased to 200%, the same-day tracking error of the leveraged ETF

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... ed on 2 times of the futures index that launched after the constraints was affected by the rate of derivatives. Third, this study analyzed the constraints of the rate of derivatives after determining whether the leveraged ETF targeted on 2 times of the index indicates whether the rate of derivatives is close to 200%. As a result, even when the rate of derivatives is slightly over the 200% limit, the tracking error was lower. Even when the constraints were slightly over the limit, the tracking error was shown to be significantly lower than the other data set. This result implies that when there is an institutional constraint on the rate of derivatives, there can be limitations to fund management of leveraged ETF targeted on 2 times of the futures index.