Notional principal

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.

See also

• Derivative instrument
• Forward rate agreement
• Swap
• Nominal
• Nominal value