Offer your thoughts or opinion on the input financial query or topic using your financial background.

Definitions of leverage and of leverage factor
Your original example is a little confusing because just shorting for 1k and buying for 1k is 100% leveraged or an infinitive leverage ratio. (and not allowed) Brokerage houses would require you to invest some capital in the trade.  One example might be requiring you to hold $100 in the brokerage.  This is where the 10:1 ratio comes from. (1000/10) Thus a return of 4.5% on the 1000k bond and no movement on the short position would net you $45 and voila a 45% return on your $100 investment. A 40 to 1 leverage ratio would mean that you would only have to invest $25 to make this trade.  Something that no individual investor are allowed to do, but for some reason some financial firms have been able to.