A roll-down in which an investor expresses a notional neutral curve switch. This carry is expressed in basis points upfront on the curve switch (the investor receives fixed on the shorter rate and pays fixed on the longer rate). For instance, if the expected roll-down for a trading involving 3-year swap/ 8-year swap is -100 basis point, an investor who receives fixed on USD 100 million of a 3-year swap versus paying fixed on the same notional of an 8-year swap would incur a loss of USD 1000,000 due to the upfront roll-down effect over the interval.
November 13, 2023
