Question

Explain the following term:

Carry

Answer 1

Carry in finance, “carry” is the net cost or benefit of holding an asset over time: the income you receive from the asset (coupon, dividend or interest) minus the costs of financing and holding it (borrowing interest, storage, insurance, etc.). If the income exceeds the holding/financing costs you have positive carry; if costs exceed income you have negative carry. The concept underpins carry trades (borrowing in a low‑rate currency to invest in a higher‑rate currency), affects forward/futures pricing (spot price adjusted for cost of carry), and appears in commodities (storage costs and convenience yield) and securities (dividend or coupon yield less financing). Separately, in private equity “carry” or "carried interest" refers to the share of profits paid to the general partner (commonly around 20% of gains above a hurdle).