Cost of carry

Cost of carry,

Definition of Cost of carry:

  1. Cost of carry refers to costs associated with the carrying value of an investment. These costs can include financial costs, such as the interest costs on bonds, interest expenses on margin accounts, interest on loans used to make an investment, and any storage costs involved in holding a physical asset.

  2. Cost of carry may also include opportunity costs associated with taking one position over another. In the derivatives markets, cost of carry is an important factor for consideration when generating values associated with an asset’s future price.

  3. The difference between the cost and the financial benefit of holding a particular asset for a specified period.

  4. Financing and trading costs associated with holding a short or long trading position.

  5. Financing, insuring, and handling and storing costs associated with holding physical commodities (actuals).

How to use Cost of carry in a sentence?

  1. Barring a few exceptions, the cost-of-carry has not influenced prices in the way it is supposed to.
  2. In the derivative markets, carrying costs are a factor that influence derivative contract pricing.
  3. Cost of carry is a factor in both direct investing and derivative markets.
  4. Carrying costs detract from total return for direct investors.

Meaning of Cost of carry & Cost of carry Definition