Cost of carry
Also known as: carrying cost
The cost of carry or carrying charge is the cost of holding a security or a physical commodity over a period of time.
Connections2
Determines the theoretical price difference between spot and futures
The cost of carry model explains why contango occurs, as the futures price must account for storage costs, insurance, and interest rates relative to the spot price.
mathematical determinant of the forward curve
The cost of carry model defines the theoretical relationship between spot prices and forward prices based on interest and storage costs.