Derivatives
Notional Amount
Definition
What is Notional Amount?
The reference amount used to calculate derivativeA contract whose value depends on an underlying asset, rate, index, or event. payments, which may exceed the cash initially exchanged.
Example in practice
How This Looks in Practice
An interest-rate swapA swap exchanging fixed-rate and floating-rate interest payments on a notional amount. has a ₦1 billion notional amount.
Keep learning
Related Terms
Derivatives
Derivative
A contract whose value depends on an underlying asset, rate, index, or event.
DerivativesUnderlying Asset
The asset, rate, index, or reference on which a derivative's value is based.
DerivativesFutures Contract
A standardised exchange-traded agreement to buy or sell an underlying asset at a future date.
Derivatives StrategiesCovered Call
A strategy that owns the underlying asset and sells call options against it.