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You are right in that the amount isn't constrained. But the net value of a derivative contract is zero. Ie, it's not right to say the "value". The term "notiona
by danielmarkbruce 5y ago
You are right in that the amount isn't constrained. But the net value of a derivative contract is zero. Ie, it's not right to say the "value". The term "notional value" is used for this reason. To further make the point - there isn't always an asset underlying a derivative - for example there is a notional value of weather derivatives.
In summary, the word "value" gets thrown around loosely.
- baq 5y agofor good reason. it is impossible to define strictly in general.
- danielmarkbruce 5y agoThere isn't a good reason to throw around the term loosely when talking about a specific field where the terms are quite well defined, like the one I gave. Folks should use the right terms if they genuinely want to communicate ideas.