How Notional and Nominal Are Used in Finance

Summary

The discussion distinguishes terminology by context. In bond and swap trading, the terms notional and nominal may refer to the same reference amount used to calculate contractual cash flows. In macroeconomics, nominal commonly describes a rate or value stated before adjusting for inflation, in contrast with a real, inflation-adjusted measure. The respondent suggests that reserving notional for structured products helps preserve this distinction.

A second answer offers a practical convention: use notional for derivatives such as swaps and nominal for cash products such as bonds. This is presented as usage guidance, not a universal rule; terminology can vary across institutions and jurisdictions. The exchange does not provide formal product definitions or settle every case, including whether the amount is fixed or changes over time. Teams defining test language should therefore state the intended meaning and product context clearly, especially where “nominal” might refer either to a bond’s principal amount or to an inflation-unadjusted economic quantity.

Key ideas

• In bond and swap contexts, notional and nominal can refer to the same reference amount.
• In macroeconomics, nominal commonly means stated before an inflation adjustment.
• One usage convention reserves notional for derivatives and nominal for cash products.
• Teams should define terms in context because usage is not presented as universal.

Tags

# What is the difference between "Notional" and "Nominal" values?


# What is the difference between "Notional" and "Nominal" values?












Actually I am facing a huge discussion at work about the vocabulary we are using to test products. We keep returning on the question; when do we use the term "Notional" and when do we use "Nominal" I know that Notional is a value that doesn't change over time (= Par value at issue date ) So what is the difference between it and "Notional" and when should we use these terminologies exactly ?

## Answer by Bangkokian (score 6)

https://quant.stackexchange.com/a/51399

The definition depends whether or not you're discussing bond/swap trading or macroeconomics.

For bonds and swaps, the "notional" or "nominal" values are the same thing.

In macroeconomics however "nominal" rates are the stated interest rates before deducting the rate of inflation. (As opposed to the "real" interest rates which are inflation-adjusted)

I think the reason you don't hear "nominal" as often as "notional" for structured products is to preserve this distinction.

## Answer by Ed S (score 0)

https://quant.stackexchange.com/a/76474

Notional - "existing as or based on a suggestion, estimate, or theory; not existing in reality."

Notional should be used for derivatives (such as swaps). Nominal should be used for cash products such as bonds

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