What is the “notional value” of a derivative contract, and how is this different than the...

What is the “notional value” of a derivative contract, and how is this different than the market value of the derivative contract?

Expert Solution

Notional value is the total underlying amount of a derivatives trade. The notional value of derivative contracts is much higher than the market value due to a concept called leverage.

While the notional value determines the total value of the position, based on contract specifications, the market value is essentially the price of a single unit of security.

jeff jeffy answered 2 years ago

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