What does Plain Vanilla Swap mean?
The simplest form of swaps. Swaps are contracts that exchange cash flows. Plain Vanilla Swap is very basic swaps where a party pays a fixed rate and receives payment on the movement of the underlying asset such as floating-for-fixed-rate loans or US Dollar for Euro.
Futures Knowledge Explains Plain Vanilla Swap
Swaps are derivative instruments and usually employed to manage risk by banks, brokers and dealers. Swap contracts generally include exchange of cash flow from a series of payment from investments in assets, liabilities, currencies, securities, equity participations and commodities. Common swaps are generally standardized. There are also specifically structured and complex swaps which involve combination of several currencies, interest rates, commodities and options.
