swap carry question

iniesta · October 9th, 2013, 11:51 am

i have been reading 2 definitions of swap carry in literature. using 10y receiving as an example1) 1y carry = r(1, 9)-r(0, 10)2) 1y carry = (r(0,10)-libor fixing)/(swap dv01)which is the correct definition?a follow up question: a forward starting swap have no carry, is that correct?

gc · October 9th, 2013, 1:30 pm

1) 1y carry = r(1, 9)-r(0, 10)2) 1y carry = (r(0,10)-libor fixing)/(swap dv01)Both are, provided you are careful by what you mean by "swap dv01". With some simple algebra you can show that the two definitions are equivalent (I can see if I still have the note I wrote some time ago to convince myself about this; if I have it i'll send it to you)> a follow up question: a forward starting swap have no carry, is that correct? Correct

Kamil90 · April 28th, 2014, 10:56 am

QuoteOriginally posted by: gc> a follow up question: a forward starting swap have no carry, is that correct? CorrectCan you please elaborate why forward starting instruments have no carry? It is supposed to be coupon less financing. What is swap starts in 6 months and we consider 1 year carry?

Martinghoul · April 28th, 2014, 2:55 pm

It's just a convention to call things that are related to actual cashflows "carry". Since a fwd swap has no cashflows in the present, it has no "carry", just "rolldown".