A simple vanilla interest rate swap is often done to hedge a floating rate exposure, although this can also be done to take advantage of a declining interest rate environment by moving from a fixed rate to a variable rate. Both parts of the swap are denominated in the same currency and interest payments are cleared. The fictitious principal does not change during the duration of the exchange and there are no built-in options. A regular vanilla swap may include a regular vanilla interest rate swap, where two parties enter into an agreement in which one party agrees to pay a fixed interest rate on a certain dollar amount on certain days and for a certain period of time. The counterparty makes payments to the first party at a variable interest rate for the same period. It is an exchange of interest rates on certain cash flows and is used to speculate on changes in interest rates. There are also regular vanilla commodity swaps and ordinary vanilla foreign currency swaps. The most common regular vanilla swap is a floating rate swap. The most common variable interest rate index is the London Interbank Offered Rate (LIBOR), which is set daily by the International Commodities Exchange (ICE).

LIBOR is reserved for five currencies – the US dollar, the euro, the Swiss franc, the Japanese yen and the pound sterling. Terms range overnight to 12 months. The interest rate is based on a survey of 11 to 18 major banks. In the financial world, the opposite of ordinary vanilla is exotic. Thus, an exotic option involves much more complicated features or special circumstances that distinguish it from more common American or European options. Exotic options present a higher risk because they require an advanced understanding of the financial markets to execute properly or successfully, and as such, they trade over-the-counter (OTC). Everything you need for your agreements is in one platform. Create, send, trade, sign, analyze and archive. It`s all there. De: Plain Vanilla in A Dictionary of Finance and Banking » Plain Vanilla can also be used to describe more general financial concepts such as trading strategies or ways of thinking in economics. For example, a Plain Vanilla card is a credit card with simply defined terms.

Ordinary vanilla debt comes with fixed-rate loans and no other features, so the borrower has no convertibility rights. Ordinary vanilla bonds are easily tradable securities. Without complex features, these bonds can be easily sold or bought on the market. Therefore, investors appreciate the liquidity of these bonds as an added benefit. Let`s see how these properties are defined in a simple vanilla binding. After the 2007 global financial crisis, efforts were made to make the financial system safer and fairer. This was reflected in the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, which also led to the creation of the Consumer Financial Protection Bureau (CFPB). The CFPB enforces risk protection for consumers in part by regulating financing options that require a simple approach. Vanilla option. An option contract without special features.

This is a call or put and has a standard expiration date and strike price. The contract does not contain any unusual provisions. It is also called a simple vanilla option. Plain Vanilla Basics Plain Vanilla describes the simplest form of an asset or financial instrument. Vanilla Debt Plan comes with fixed income loans and no other features, so the borrower has no convertibility rights. A simple, vanilla financing approach is called a vanilla strategy. Regular vanilla is the most basic or standard version of a financial instrument, usually options, bonds, futures and swaps. It is the opposite of an exotic instrument that modifies the components of a traditional financial instrument, resulting in a more complex title. In a simple vanilla interest rate swap, Company A and Company B choose a term, nominal amount, currency, fixed interest rate, variable interest rate index, and interest reset and payment dates. On the payment dates specified for the duration of the swap, Enterprise A shall pay to Enterprise B an amount of interest calculated by applying the fixed interest rate to the principal amount and Enterprise B shall pay Enterprise A the amount resulting from the application of the variable interest rate to the principal amount.

Only the net difference between interest payments changes hands. Vanilla software. From Wikipedia, the free encyclopedia. Computer software, and sometimes other computer systems such as computer hardware or algorithms, are called vanilla if they have not been adapted from their original form, which means that they are used without any adjustment or update. .