# Notional principal amount

(redirected from Notional Principals)

## Notional principal amount

In an interest rate swap, the predetermined dollar principal on which the exchanged interest payments are based.

## Notional Principal Amount

In an interest rate swap, the arbitrary amount over which interest is calculated. Suppose the two legs of the swap are a fixed interest rate, say 3.5%, and a floating interest rate, say LIBOR + 0.5%, and the notional principal amount is \$1 million. In such a swap, the only things traded are the two interest rates, which are calculated over the notional principal amount. That is, the \$1 million is never exchanged, but the interest is calculated with reference to it. For example, the fixed interest is 3.5% of \$1 million (or \$35,000). It is also called the notional value.
References in periodicals archive ?
Assume equal notional principals and denote the risk premiums and expected survival rates for such cohorts by [[pi].
On each of the payment dates, t, the contract calls for the fixed-rate payer to pay the notional principal multiplied by a fixed proportion (1 + [pi]) H(t) to the floating-rate payer and to receive in return the notional principal multiplied by S(t).
The second enters into a portfolio of k annual survivor forward contracts, each of which requires payment of the notional principal multiplied by (1 + [[pi].
from which it follows that the fair value in a floating-for-floating basis swap requires one party to make payments determined by the notional principal multiplied by [S.
Thus, in the case of a floating-for-floating cross-currency basis swap, on each payment date, n, one party will make a payment of the notional principal multiplied by [S.
Thus, if the notional principal were \$1 million and the time frame were 1 year, a long position in a December futures contract at a price of [pi] = 3 percent would notionally commit the holder to pay \$1.

Site: Follow: Share:
Open / Close