Cost of carry

The cost of carry, $c$, summarizes the relationship between the futures price and the spot price. It is defined as

   cost of carry$$=$$interest$$+$$storage cost$$-$$income earned.

Therefore the cost of carry would be

$$\begin{tabular}{rl} $r$ & for a non-dividend paying stock; \\ $... ...y with storage costs; \\ $r-r_{f}$ & for a currency; and so on. \end{tabular}$$

The cost of carry allows one to write the futures price for an investment asset as

$$F\left( t,\tau \right) =S\left( t\right) e^{c\left( \tau -t\right) }$$,

and for a consumption asset as

$$F\left( t,\tau \right) =S\left( t\right) e^{\left( c-y\right) \left( \tau -t\right) }\text{,}$$

where $y$ is the convenience yield, a measure of the benefits from ownership of an asset that are not obtained by the holder of a long futures contract on the asset.