Notional Value
5paisa Research Team
Last Updated: 30 Dec, 2024 02:57 PM IST

Content
- What Is Notional Value?
- How Notional Value Works
- How Notional Value is calculated?
- Notional Value Example
- Notional Amount Uses in Swaps, Options, and Foreign Currencies
- Applications of Notional Value
- What is effective Notional Value?
- Conclusion
In a derivative contract, the value of the underlying asset is referred to as Notional Value (NV), or simply Notional. NV is applicable to forward contracts, futures, options, and currencies, among other investments. It is merely the face value of the underlying asset, which serves as the foundation for payments. NV can also refer to the total value of a position, the amount that the position controls, or the sum that is specified in a contract.
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Frequently Asked Questions
Notional value helps determine the total value of a financial contract without directly considering the market price.
No, notional value refers to the total value of a contract, while face value is the nominal value of an asset or security.
Effective notional amount represents the adjusted total value of an investment after accounting for leverage or other factors.
Notional value in an option refers to the total value of the underlying asset that the option contract controls.