Carry trades earn the rate differential as long as the high-yield currency doesn’t fall by more. They tend to unwind sharply in market stress – the yen carry trade unwind of August 2024 is a recent example.
How to use the Carry Trade Calculator
- Position size
- Interest rate – currency invested
- Interest rate – currency borrowed
- Holding period
- Leverage
- Change in the invested currency’s value
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the position size, the interest rates of the currency you invest in and the one you borrow, the holding period, leverage and the expected change in the exchange rate.
Tips
- Use real (inflation-adjusted) figures to compare across years.
- Check whether data are seasonally adjusted.
- Use the same currency and base year throughout.
- Economic models simplify reality – treat results as illustrations, not forecasts.
Common mistakes to avoid
- Mixing nominal and real values.
- Comparing percentage changes with percentage-point changes.
- Treating correlations as causes.
Inputs explained
| Field | What to enter |
|---|---|
| Position size | Amount in your currency |
| Interest rate – currency invested | In % |
| Interest rate – currency borrowed | In % |
| Holding period | In days |
| Leverage | A number |
| Change in the invested currency’s value | In % |
What each result means
- Interest carry = [Position size]×([Interest rate – currency invested] – [Interest rate – currency borrowed])÷100×[Holding period]÷365
- Exchange rate gain or loss = [Position size]×[Change in the invested currency’s value]÷100
- Total profit or loss = [Interest carry] + [Exchange rate gain or loss]
- Margin required = [Position size]÷[Leverage]
- Return on margin = [Total profit or loss]÷[Margin required]×100
- Break-even currency fall = ([Interest rate – currency invested] – [Interest rate – currency borrowed])×[Holding period]÷365
Example values
How the main result changes when Position size changes and everything else stays at the example values above:
| Position size | Total profit or loss |
|---|---|
| 50,000 | 1,250 |
| 75,000 | 1,875 |
| 100,000 | 2,500 |
| 125,000 | 3,125 |
| 150,000 | 3,750 |
| 200,000 | 5,000 |
Formula
Interest earned = amount × high rate × timeInterest paid = amount × low rate × timeCarry = amount × (high rate − low rate) × timeFX gain/loss = amount × (end rate ÷ start rate − 1) (in funding-currency terms)Return on margin = total ÷ (amount ÷ leverage)Worked example
Inputs — Position size: $100,000; Interest rate – currency invested: 5 %; Interest rate – currency borrowed: 0.5 %; Holding period: 365 days; Leverage: 5; Change in the invested currency's value: -2 %.
Results — Interest carry = $4,500.00; Exchange rate gain or loss = $-2,000.00; Total profit or loss = $2,500.00; Margin required = $20,000.00; Return on margin = 12.5 %; Break-even currency fall = 4.5 %.
Frequently asked questions
What is a carry trade?
Borrowing in a low-interest currency to invest in a higher-interest one.
What is the main risk?
The high-yield currency falling by more than the rate difference.
Why do carry trades unwind suddenly?
Leverage and crowding cause rapid selling when markets turn.
What formula does the Carry Trade Calculator use?
Interest earned = amount × high rate × time.