COST OF CARRY
The cost of financing an asset. If the cost is lower than the interest received, the asset has a positive cost of carry; if higher, the cost of carry is negative. The cost of carry is determined by the opportunities for lending the asset and the shape of the yield curve. So a bond, for example, would have a positive cost of carry if short-term rates (financing rates) were lower than the assets’s yield or (and) if the cost could be mitigated by lending out the securities.
Related Terms:
Future