Notional principal amount

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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 ?
Over 35% of the cleared MXN notional principal outstanding in CME was eliminated in this cycle, the first ever compression in a cleared Latin American currency.
Transactions covered under Notice 2015-74 may include notional principal contracts, forwards, or any other derivative, and are not limited exclusively to those structured as options.
registered broker-dealer and member FINRA/NFA/SIPC, placed Series 2015-1 Notes with notional principal at $100,000,000 through a newly formed Bermuda domiciled catastrophe bond shelf program, Pelican III Re Ltd.
0 percent of total income while notional principal contract income ($86.
Over 70% of the notional principal outstanding of subordinated debt-linked CDS and over 50% of the senior debt- linked CDS notional principal submitted to the cycles were compressed.
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).
3) Furthermore, it was the intent of Congress that offsetting notional principal contracts (see Q 1089) also be included in the definition of "appreciated financial position," and such a definition is supported by the language of IRC Section 1259(c)(1)(D).
The total return swap qualifies as a notional principal contract (NPC) for U.
863-7 regarding the allocation of income attributable to certain notional principal contracts under the broad regulatory authority afforded the IRS.
a credit card agreement, a notional principal contract, a futures or forward contract (including a "take or pay" contract), or any derivative); (iv) an endowment contract, annuity contract, or an insurance contract that has cash value; and (v) nonfunctional currency.
Notional principal isn't actually money at risk, but rather a factor in determining the amount of protection a derivative provides.
3 trillion as of June 30 on a notional principal amount basis, up 8.