Interest received and interest paid are the two financing lines in a strategy's profit and loss: interest received is credited to the strategy, and interest paid is the cost of borrowing to fund leverage or a short position. The P&L breakdown shows them apart, so financing appears as its own effect rather than buried in the total.
Also seen as: financing cost, margin interest, carry
How does Fincanva handle it?
- The P&L breakdown carries two bands — "Interest received" on the gains side and "Interest paid" on the costs side — so the two directions are never netted into one figure.
- Interest paid is charged only when the Costs simulation assumption is on. That assumption is off by default for every account, so interest paid reads zero until you switch costs on.
- Uninvested (idle) cash rides on the same assumption as interest paid: with that assumption off — its default — idle cash earns nothing, so both bands read zero, and a wide cash band on the capital chart is capital that earned nothing.
- With the Costs assumption on, idle cash is credited the margin-loan reference rate minus your "Borrowing rate markup", and never less than zero while that reference rate is above zero, so when the markup is the larger of the two, idle cash earns nothing.
- When the reference rate is at or below zero, idle cash can be charged interest instead of earning it — as with the negative rates banks have charged on cash holdings — never more than 1% a year.
What does Fincanva charge interest on?
Interest paid arises whenever a strategy borrows: it uses leverage (borrows capital to hold more than its cash) or holds a short position (borrows the securities it sells). Each is priced as a spread over the broker's base rate, set by two fields in your simulation assumptions — "Borrowing rate markup" ("Spread added above the broker rate when borrowing capital.") and "Short rate markup" ("Spread added above the broker rate when shorting securities."). Those spreads are the interest-rate markups; interest paid is only applied when the Costs assumption is on.
What does it look like in practice?
A strategy runs at 1.5× leverage for a month, borrowing 0.5× its capital to hold more exposure than its cash covers. For the days it holds that borrowed portion it pays the broker's base rate plus your "Borrowing rate markup" on the borrowed amount. That financing cost lands on the Interest paid band and pulls the net Portfolio line down for the month — the price of the extra exposure. Turn the Costs assumption off and the band drops to zero, which is why cost-free results flatter a leveraged strategy.