Notional principal: Difference between revisions
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(NP). | |||
Notional principal is the base amount on which the settlement of a derivative instrument - such as an Forward Rate Agreement (FRA) or a swap - is calculated. | Notional principal is the base amount on which the settlement of a derivative instrument - such as an Forward Rate Agreement (FRA) or a swap - is calculated. | ||
The amount of notional principal would commonly be set equal to the principal amount of any underlying exposure being hedged. | The amount of notional principal would commonly be set equal to the principal amount of any underlying exposure being hedged. | ||
The notional amount itself is not exchanged. | |||
Notional principal is also known as the ''notional amount'', or ''notional value''. | |||
== See also == | == See also == | ||
* [[Derivative instrument]] | * [[Derivative instrument]] | ||
* [[Forward rate agreement]] | * [[Forward rate agreement]] | ||
* [[Nominal]] | |||
* [[Nominal value]] | |||
* [[Principal]] | |||
* [[Swap]] | * [[Swap]] | ||
[[Category:Manage_risks]] | |||
[[Category:Risk_frameworks]] | |||
Latest revision as of 12:51, 5 July 2022
(NP).
Notional principal is the base amount on which the settlement of a derivative instrument - such as an Forward Rate Agreement (FRA) or a swap - is calculated.
The amount of notional principal would commonly be set equal to the principal amount of any underlying exposure being hedged.
The notional amount itself is not exchanged.
Notional principal is also known as the notional amount, or notional value.
