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Notional: meaning, definitions and examples

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notional

 

[ ˈnoʊʃənl ]

Adjective
Context #1 | Adjective

general use

Notional refers to something that exists in thought or as an idea but not as a tangible or physical entity. It often implies a theoretical concept rather than a practical application.

Synonyms

abstract, conceptual, theoretical.

Examples of usage

  • The notional value of the asset is significantly higher than its market price.
  • In financial terms, notional amounts are often used to calculate exposure.
  • The project has a notional scope, which outlines broad objectives.
Context #2 | Adjective

finance

In finance, notional refers to the total value of a leveraged position's assets, commonly used in futures and derivatives markets to denote the scale of exposure.

Synonyms

calculated, imagined, nominal.

Examples of usage

  • The notional amount is crucial for understanding the total risk involved in the transaction.
  • She invested a notional sum in the derivatives market.
  • Understanding the notional exposure can help in managing financial risks.

Etymology

The term 'notional' originates from the Latin word 'notio,' which means 'a notion or idea.' It evolved through Middle English, where it was used to describe concepts that exist in thought. The prefix 'not-' relates to knowing or recognizing, emphasizing the intellectual aspect of notions. By the late 19th century, it started to gain specific usage in finance, where it described values not necessarily tied to physical assets but representing theoretical values that could influence real-world transactions. This dual usage reflects our evolving understanding of concepts and their practical implications in various fields.

Word Frequency Rank

Positioned at #20,958, this word is part of extensive vocabulary. It's relatively rare in general usage but may be important in specific fields or formal writing.