positive carry

Positive Carry

A strategy of holding two offsetting positions, one of which creates an incoming cashflow that is greater than the obligations of the other.

Notes:

Similar to arbitrage, positive carries generally occur in the currency market where interest paid to investors in one currency is more than they have to pay to borrow in another currency.

Another example of a positive carry would be borrowing $1000 from the bank at 5% and investing it into a bond paying 6%. Thus, the coupon on the bond would pay more than the interest owing on the loan to the bank, and you pocket the 1% difference.

See also: Arbitrage, Basis Risk, Currency Carry Trade, Currency Swap, Exchange Rate, Interest Rate Swap, Negative Carry

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Positive carry

Related: Net financing cost

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positive carry

The current net income from an investment position when the current income from the investment exceeds its cost of carry. A Treasury bond with a current yield of 14% has a positive carry if its purchase can be financed at 12%. Compare negative carry. See also carrying charges.