Notional value is a term used in finance to refer to the nominal or face value assigned to a financial instrument, such as a derivatives trade. It is the total value of a position in a financial instrument, such as a derivatives trade, and is used to calculate payments made on that instrument. The notional value is the theoretical value of a position in securities and is used to distinguish the total value of a position from the total cost required to obtain the position. It is also used to calculate the amount of interest due on an interest only class which is not entitled to any principal. Notional value can be applied to interest rate swaps, total return swaps, equity options, and foreign currency derivatives. The notional value is different from the market value, which is the price at which that position can be bought or sold in the marketplace. The notional value is used to assess portfolio risk and can be very useful when determining hedge ratios to offset that risk.