What is the definition of contract notional value for a futures contract (use futures price or spot price)?

External question — Quantitative Finance Stack Exchange Author: L. Francis Cong Original post: https://quant.stackexchange.com/questions/70846 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. I'm a bit confused about the definition of contract notional value for a futures contract. It is not defined in John Hull's Options, Futures, and Other Derivatives . I find two definitions online. Both have a lot of sources: Futures price $\times$ contract size CME Anthony Crudele tastytrade CFA Institute Journal Review Spot price $\times$ contract size Investopedia the balance TD Ameritrade Wallstreetmojo Degiro Some even use one definition in the formula or definition, but use the other definition as a numerical example: gocardless Marketswiki Similarly, in CFA Level 3 curriculum (May 2022), In Reading 9 about Swaps, forwards, and futures strategies, Section 8.1, the first definition is used. It writes Once the notional values to be traded are known, Rossi determines how many futures contracts should be purchased or sold to achieve the desired asset allocation. The FTSE MIB Index futures contract has a price of 23,100 and a multiplier of €5, for a value of €115,500. The DAX index futures contract has a price of 13,000 and a multiplier of €25, for a value of €325,000. In Reading 11 about fixed-income portfolio management, Section 7.2.1 about using futures for leveraging fixed income portfolio, the second definition is used. It writes A futures contract’s notional value equals the current value of the underlying asset multiplied by the multiplier, or the quantity of the underlying asset controlled by the contract. So I'm shocked by the divergence of opinions. Personally, I think the first one makes more sense since its daily changes is used for mark to market and it is also used to calculate the hedge ratio, e.g. in cross-hedging. I don't know why the second definition pops out.

External answer — Quantitative Finance Stack Exchange Author: ThatDataGuy Original post: https://quant.stackexchange.com/a/73492 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. The definitions of 'notional' sizes for futures are pretty arbitrary and are not comparable. Comparing between futures types (eg, interest rate futures and index futures) is especially meaningless. What determines a futures contract 'size' is the contract terms. In many cases there is a number in those terms that may seem appealing to use as a comparative size. For example, different oil futures contract terms may specify the number of (standard size) barrels at delivery. That's comparable (even if they aren't fungible), but that doesn't mean anything when related to a S&P index future. When looking for a standard sense of relative size, you might also consider delta. But again this isn't as comparable as we might want, as it implicitly is bound to the underlying's price semantics. For example, we might look at the deltas of a position in S&P index futures, vs a position of FTSE 100 Index futures. The deltas (PnL / point ratio) might be equal, but the points of each index are not equal, so your positions' PnL responses to market repricings of risk (the real delta) isn't equal either. Similarly, multiplying a contract 'size' by the price is also pointless, because price semantics can be so different across contracts. Issues like this are why comparing (or aggregating) financial risk of securities positions is a non-trivial exercise.