Quote from Wikipedia:
The cost of carry is the cost of "carrying" or holding a position. If long the cost of interest paid on a margin account, or if short the cost of paying dividends, or opportunity cost the cost of purchasing a particular security rather than an alternative. For most investments, the cost of carry generally refers to the risk-free interest rate that could be earned by investing currency in a theoretically safe investment vehicle such as a money market account minus any future cash-flows that are expected from holding an equivalent instrument with the same risk (generally expressed in percentage terms and called the convenience yield). Storage costs (generally expressed as a percentage of the spot price) should be added to the cost of carry for physical commodities such as corn, wheat, or gold.
The cost of carry model expresses the forward price (or, as an approximation, the futures price) as a function of the spot price and the cost of carry.
F = S e^{(r+s-c)t}\,
where F is the forward price, S is the spot price, e is the base of the natural logarithms, r is the risk-free interest rate, s is the storage cost, c is the convenience yield, and t is the time to delivery of the forward contract (expressed as a fraction of 1 year).
The same model in currency markets is known as interest rate parity.
