Carry (investment)

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The carry of an asset is the return obtained from holding it (if positive), or the cost of holding it (if negative) (see also cost of carry). For instance, commodities are usually negative carry assets, as they incur storage costs or may suffer from depreciation. But in some circumstances, appropriately hedged commodities can be positive carry assets if the forward/futures market is willing to pay sufficient premium for future delivery. An example of high carry asset is gold during a financial crisis, due to its safe haven quality. A carry trade is a trade in which profit is incurred from the spread between borrowing a low carry asset and lending a high carry one. Carry trades turn profit only if nothing changes against the carry's favor, and thus they are not necessarily arbitrages, which need to be risk-free. The term carry trade, without further modification, refers to currency carry trade, in which investors borrow low-yielding currencies and lend (invest in) high-yielding currencies.

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