The value that is stated on a coin or banknote (monetary assets). Nominal value refers also to the face value of a financial instrument, on which payment of interest or payoff is based and calculated. It is the the total value (in monetary terms) that reflects monetary amount at which an instrument is issued and will be redeemed at (rather than its current market value). For example, the nominal value of a bond is typically the bond’s price at the time of issuance. Likewise, for a Treasury bond, the nominal value is the face value (typically $100 or $1,000).
Broadly speaking, for an instrument, a product, or a position, nominal value is its original value at which it is issued or established.
In relation to derivatives, it may refer to notional value (notional principal amount, NPA) of the underlying asset in a derivative such as a futures contract, an option or a swap.
For example, a futures contract in which the underlying asset, such as corn, is trading at $5 per bushel, a standard contract (5,000 bushels) would have a notional value of ($5 × 5,000) = $25,000. For an option contract, standard size of U.S. equity options contracts is 100 shares of the underlying stock. If shares of XYZ are trading for $50 per share, the notional value of a call option or put option on XYZ would be ($50x 100) = $5,000.
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