What does Carrying Charge mean?
Carrying charge, also known as carrying cost, means the cost or charge involved in holding any financial product or physical commodity over a period of time. This cost is a combination of interest charged on the borrowed fund, insurance, storage charges for physical goods or any other related fund.
Futures Knowledge Explains Carrying Charge
In a developed economy, the difference in the yield of Interest Rate Future and the yield on Spot is the carrying charge. In most cases, the carrying charge is a risk free return. Higher cost of carry erodes the profit margin.