Derivatives · Core
Notional Value
Notional value is the face amount a derivative references — the exposure scale, not the cash outlay or the market value.
Definition
A $10mm notional swap has $10mm of rate exposure; the MTM may be $80k. Futures notional is contract size × index. Options notionals are often delta-adjusted for risk. Gross notional without netting is a scare headline.
Why it matters
Leverage is notional / equity. Risk systems that only see MTM miss the next margin call.
Case
A 2× leveraged ETF with $1bn AUM has ~$2bn futures notional. A 5% index day is a 10% NAV day. The notional was the product.
How to read it
State gross vs net vs delta-adjusted. Then convert notional into the actual risk unit (DV01, delta dollars).
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