If I understand correctly, 6M carry in a fixed-floating interest rate swap should be the difference between the fixed and floating leg.

When I read this on Page 2: https://corporate.nordea.com/api/research/attachment/2796

The 6M carry is DIVIDED by DV01. Why is this? I can see why you would multiply by the DV01 to get the absolute value, but why scale it?

E.g. $Carry(6M) = \frac{SR(0,5Y)-F(0,6M)}{dv01(Swap(6m,4.5Y))}$ whereby $SR(0,5Y)$ is the 5Y spot swap rate at inception and $F(0,6M)$ is the 6M floating fixing.


1 Answer 1


Page 1 says that "carry & roll can be given in relative or absolute terms". For example, if, over a holding period, you earn 10bp of notional on a swap that has a DV01 of 4.5, what you earn has the same value as a 2.2bp change in the swap rate, so: absolute carry = 10bp (of notional), and relative carry = 2.2bp (of swap rate) (i.e., in market jargon: 2.2bp "running").


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