Carry and Roll Down Interview Guide
Carry and roll down interview guide covering carry, rolldown, curve assumptions, duration, examples, risks, and caveats.
Candidates explaining bond and curve trade return components.
Carry is expected income under assumptions
Carry often refers to income or return earned from holding a position over time, assuming market conditions follow a specified path.
Roll-down comes from moving along the curve
As a bond ages, its remaining maturity changes. If the yield curve stays the same, the bond may roll to a different yield point.
Concrete example
On an upward sloping curve, holding a bond may benefit from rolling toward a lower yield point, but only if the curve does not move adversely.
Assumptions drive interpretation
Carry and roll-down are not guaranteed. They depend on curve stability, financing costs, hedging choices, and changes in spreads or volatility.
Common mistakes
Candidates often present carry as free return. A better answer states the curve and funding assumptions and the risks that can overwhelm carry.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.