Quick Definition

Notional value refers to the total value of a leveraged position's assets. This value is used in derivatives trading to determine the total amount involved in the trade, rather than the cost of entering the trade.

Examples

• 1In a futures contract for 100 barrels of oil priced at $60 per barrel, the notional value is $6,000.
• 2A forex trader uses a 100:1 leverage to trade $100,000 worth of currency with only $1,000. The notional value of the trade is $100,000.
• 3An investor enters into a swap agreement based on $5 million of principal, where the notional value is the $5 million used to calculate periodic interest payments.

Tags