1

Trying to calcuate the carry on a 6m10y payer swaption.

So far, I have used: carry = spot rate - libor

Do I use the 6m LIBOR rate (0.15213%)? And do I just use the 10y yield for the spot rate (1.26)?

So is the carry 1.11?

Any help would be much appreciated.

Jonny
  • 11
  • 1

1 Answers1

1

Not sure that carry is well-defined in this case, but in general I'd say you want to consider both rates "carry" (i.e. rolldown on the yield curve between 6mf10y and 3mf10y for e.g.) and vol "carry" (i.e. rolldown on the vol term structure between 6m vol and 3m, for e.g.).

user42108
  • 2,252
  • 5
  • 10