Carry strategies conceptually harvest interest rate differentials between currencies. Positive carry exists when you are paid to hold the higher-yielding leg versus the lower-yielding leg, before costs and risk premia.
Carry performs best in low-volatility, stable-risk environments. When volatility spikes or funding stress appears, carry baskets can delever sharply — losses may exceed coupon income.
Always model transaction costs, rollover/funding on your wrapper product, and tail risk. Past carry episodes do not guarantee future smooth returns.
Educational only · not investment advice · Risk disclosures