The difference between the financing cost of an asset/ investment (e.g., a security) and its cash yield. In other words, cost of carry is calculated as:

Cost of carry = financing cost – current yield

Financing cost constitutes the cost of borrowing to fund the purchase of the asset/ investment in question, while current yield is the profit earned from the asset/ investment.

When financing cost exceeds current yield, negative carry arises:

Negative carry: financing profit > financing cost

In the opposite case, the situation is called positive carry:

Positive carry: financing profit < financing cost

Cost of carry is also known as net financing cost or simply as carry.