The interest amounts are calculated by multiplying applicable interest rates with the notional principal amount. Thus, this value serves as a base for interest calculations. The diagram below specifies how the interest rate swaps take place. It is a widely used process in the case of markets ...
Definition of Notional Value In general terms, Notional Value (NV) is the nominal value of the securities in the case of shares, debentures, etc. which is known as the face value of the securities and is treated as the minimum value of securities which generally does not change with change...
Notional value present in derivative contracts is an imaginary value. Under normal circumstances, this amount never changes hands. Hence, it is not a real value but instead a notional value. This may sound confusing. However, we can help clarify this with the help of an example....