Carry Return
Return from coupon income received during the holding period.
Carry return is the portion of total return attributable to coupon payments received between settlement and the horizon date. It represents the income earned simply by holding the bond, before any price changes.
Formula
Variables
| R_{carry} | Carry return (decimal) |
| CF_i^{coupon} | Coupon payment at time t_i (per 100 par) |
| T | Horizon date |
| P_0 | Initial dirty price (per 100) |
| N | Notional amount |
Assumptions
- Only coupons received before horizon are included
- Coupon amounts are per 100 par, scaled by notional
- Initial investment is dirty price × notional / 100