Large notional positions in short term fixed income futures, like Eurodollar futures contracts, would not necessarily be alarming given the low volatility of the reference assets concerned.
The quantitative accuracy of the model in reproducing key parameters (i.e., the notional shoreline position, the swash depth, the flow velocity, the overtopping flow volume, the beach change depth and the sediment transport rate) is shown to be satisfactory through comparisons against analytical solutions, experimental data as well as previous numerical solutions.
But the traders "continued to build the notional size of the positions through late March," according to the report, which was led by Michael J. Cavanagh, the bank's co-head of corporate and investment banking.
The threshold set by the CFTC requires the fund to have: (i) no more than 5% of the fund's portfolio in aggregate comprised of initial margin and premiums on commodity interest positions, or (ii) an aggregate net notional value of commodity interest positions not exceeding 100% of the liquidation value of the pool.
If they use short-term swaps to hedge longer-term bonds (which are more sensitive to interest rates), the notional size of the derivatives position can legitimately exceed that of the underlying position by many times.
As a result, the company no longer discloses the notional amount of its derivative position, which was $1.1 billion in 2000.
Fannie Mae and Freddie Mac, in contrast, publish the notional amount of their derivative positions and disclose more information about their various counterparties.
WALL STREET JOURNAL Morgan Stanley Makes Trades in Shrinking Derivatives Unit | Morgan Stanley bought credit positions with a notional value of more than $50 billion over the last three years, despite plans to shrink its derivatives business.
Goldman's overall position with A.I.G., or the "notional" value of the contracts, was about $20 billion, he said.
Given that, it's a good practice to sum-up the notional value of the contracts, once for long positions and once for short positions.
