A foreign exchange contract in which the notional is determined by a specific tradable financial price/ asset. For instance, the notional might be determined by the value of a bond or stock. In this sense, a variable notional forward foreign exchange contract (VNFF) is basically similar to a quanto, whereby the notional characteristically changes in line with the value of its underlying. The payoff of a VNFF is given by:

Payoff = (X₀ – X_*) . S_* . N

where:

X₀ is the spot outright exchange rate

X_* is the future outright exchange rate

S_* is the spot rate N is the notional amount.