Posted in Finance, Accounting and Economics Terms, Total Reads: 305
Definition: Plain Vanilla
Plain Vanilla, as the name suggests describes the most simple & standard version of a financial instrument like swap, option, bond, future etc. In the context of options: Put options, call options are often described as plain vanilla options.
The opposite of plain vanilla options are exotic options.
Exotic instruments are complex securities, but the plain vanilla securities are easier to understand and hence much easy to price.
In the context of bonds: Plain Vanilla Bond is the most basic bond with no additional features. The additional features could include call option for the bond issuer, put option for the creditor etc.