notional amount

notional amount
USA
The amount on which the payments of the parties to a derivatives contract are based, usually used in the context of swaps, such as currency swaps and interest rate swaps. The amount is "notional" because there is no actual exchange of principal amounts. In the context of credit derivatives, the notional amount usually equals the amount of credit risk on which the protection buyer has bought protection from the protection seller. The notional amount is often equivalent to the principal amount owed by the reference entity under the reference obligation and is typically reduced in accordance with reductions in the principal amount.

Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.

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  • Notional amount — The notional amount (or notional principal amount or notional value) on a financial instrument is the nominal or face amount that is used to calculate payments made on that instrument. This amount generally does not change hands and is thus… …   Wikipedia

  • notional amount — The principal amount or face value of a derivative. Defined by the Financial Accounting Standards Board ( FASB) in FAS 133 as the number of currency units, shares, bushels, pounds or other units specified in a derivatives contract. The notional… …   Financial and business terms

  • notional amount — noun A nominal amount of a financial instrument that is used to calculate payments made on that instrument, especially for instruments that do not have a well defined face value or par value …   Wiktionary

  • Notional Amount — (номинальный размер) сумма, которая используется при расчете процентных платежей по обязательствам, у которых нет основной суммы долга или сумма для расчета размера процентных платежей отличается от основной суммы долга …   Ипотека. Словарь терминов

  • notional — no‧tion‧al [ˈnəʊʆnəl ǁ ˈnoʊ ] adjective a notional amount, price, rent etc is not real but is guessed at or used as an example: • an amount which had been based on the notional values of the homes which they occupied * * * notional UK US… …   Financial and business terms

  • Notional principal contract — The term notional principal contract (NPC) is a term of art used by U.S. federal income tax professionals for contracts based on an underlying notional amount (other financial services professionals refer to such NPCs under the more general… …   Wikipedia

  • notional principal — See notional amount. American Banker Glossary * * *    The hypothetical amount on which interest payments are based in products such as interest rate swaps, forward rate agreements, caps and floors.    ► See also Cap, FRA, Floor, Swap …   Financial and business terms

  • notional principal balance — See notional amount …   Financial and business terms

  • Notional Principal Amount — In an interest rate swap, the predetermined dollar amount on which the exchanged interest payments are based. Each period s rates are multiplied by the notional principal amount to determine the value of each counterparty s payment …   Investment dictionary

  • Notional Value — The total value of a leveraged position s assets. This term is commonly used in the options, futures and currency markets because a very small amount of invested money can control a large position (and have a large consequence for the trader).… …   Investment dictionary

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