Plain Vanilla

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Plain vanilla

A term that refers to a relatively simple derivative financial instrument, usually a swap or other derivative that is issued with standard features.

Plain Vanilla

1. See: Plain vanilla option.

2. See: Plain vanilla swap.

Plain Vanilla

What Does Plain Vanilla Mean?

A term used to describe a standardized financial instrument: option, bond, future, and swap. Its opposite is an exotic instrument that alters the components of a traditional financial instrument, resulting in a more complex security.

Investopedia explains Plain Vanilla

As an example, a plain vanilla option is the standard type of option, one with a simple expiration date and strike price and no additional features. With an exotic option such as a knock-in option, an additional contingency is added so that the option becomes active only after the underlying stock hits a set price point.

Related Terms:
• Convertible Bond
• Derivative
• Futures Contract
• Knock-In Option
• Swap

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