Notional Property

Updated at November 23, 2021 13:11

Reading time:

This property is only required for bond derivatives. We only ask for sovereign bond positions (and derivatives on sovereign bonds) where clients use them in short selling and are subject to the EU Short Selling Regime. The notional amounts of bond derivatives are not used in our standard shareholding disclosure rules.

The Notional Property: a definition

The FundApps Property 'Notional' captures the value of the derivative in terms of the face value of the underlying debt instrument.

Full definition:

The reference value of the derivative/bond-fund instrument (in instrument currency) in terms of the underlying debt instruments. Applies to derivatives on bonds, derivatives on bond indices or holdings of sovereign bond funds. This may be the face value or a multiple of the face value of underlying debt. For bond funds or bond indices, this will be the sum of the individual bond constituent holding values (not market values), in a common currency.

What did you just say?

To put it another way, Notional captures the total face value of the Derivative in instrument currency.

The Notional of the derivative is either the face value, if the derivative represents one of the underlying, or a multiple of the face value, if the derivative represents a number of the underlying instruments.

What is the difference between Notional and ContractSize?

ContractSize refers to the actual NUMBER of underlying instruments represented by a derivative, whereas Notional refers to the FACE VALUE represented by the derivative in instrument currency.

Data providers provide notional in the form of a value, which is why we have defined the Notional property this way.

How about some examples?

Great idea.

Consider the case of a bond future.

The Notional covers "how much underlying debt" the derivative represents. If the future represents "one bond", then the notional of that future should be equal to the face value of the underlying bond. In the case that the Future represents 10 bonds, then the notional of the Future would be 10x Face Value.

For another example, consider a future on an index of 10 bonds. If each individual bond has a face value of 100, the Notional of the future will be 1000.