N

Negative Carry

A negative carry occurs when the cost of holding a financial asset exceeds the income generated by it. It occurs typically when an asset pays a lower return than what it costs to finance its purchase.

Nominal Effective Exchange Rate

An unadjusted weighted average rate at which one country's currency exchanges for a basket of multiple foreign currencies is called the nominal effective exchange rate (NEER). Nominal exchange rates indicate the amount of domestic currency needed to purchase foreign currency.

Non-Deliverable Forward

Non-deliverable forwards (NDF) are cash-settled, and usually short-term, forward contracts. The notional amount is never exchanged, hence the name "non-deliverable." Two parties agree to take opposite sides of a transaction for a set amount of money—at a contracted rate, in the case of a currency NDF.

Notional Value

The notional value of an underlying asset is often used by derivatives traders to refer to the contract's value. This can be the total value of a position, the amount that a position controls, or an agreed-upon amount. A financial asset's face value is used to determine its payment. In the options, futures, forward, and currency markets, this term describes derivative contracts.

Natural Hedge A risk management strategy that reduces exposure by aligning assets with inherent negative correlations or by matching operating expenses and revenues in the same currency to minimize exchange rate risk.