What is a 'Plain Vanilla Swap'
A plain vanilla swap is the most basic type of forward claim that is traded in the overthecounter market between two private parties, usually firms or financial institutions. There are several types of plain vanilla swaps, such as the plain vanilla interest rate swap, the plain vanilla commodity swap and the plain vanilla foreign currency swap.
BREAKING DOWN 'Plain Vanilla Swap'
In a plain vanilla interest rate swap, Company A and Company B choose a time frame, a principal amount, a single currency, a fixed interest rate, a floating interest rate and payment dates. On the specified payment dates for the duration of the time frame, Company A pays Company B a fixed rate of interest on the principal amount, and Company B pays Company A a floating interest rate on the principal amount. All payments are made in the same currency and only the net sum of each payment exchanges hands. The purpose of such an exchange might be to reduce interestrate risk.

Plain Vanilla
The most basic or standard version of a financial instrument, ... 
Asset Swap
Similar in structure to a plain vanilla swap, the key difference ... 
Vanilla Strategy
An approach to investing or to business decisionmaking that ... 
Zero Coupon Swap
An exchange of income streams in which the stream of floating ... 
Fixed Price
The leg of a swap that is based on an unchanging interest rate. ... 
Plain Vanilla Card
A basic credit card with no special features or perks and no ...

Investing Basics
What Does Plain Vanilla Mean?
Plain vanilla is a term used in investing to describe the most basic types of financial instruments. 
Investing
What's an Interest Rate Swap?
An interest rate swap is an exchange of future interest receipts. Essentially, one stream of future interest payments is exchanged for another, based on a specified principal amount. 
Forex Education
Currency Swap Basics
Find out what makes currency swaps unique and slightly more complicated than other types of swaps. 
Investing Basics
How Are Interest Rate Swaps Valued?
When trading in financial markets, higher returns are generally associated with higher risk. Hedge your risk with interest rate swaps. 
Financial Advisors
Ditching HighYield Bonds for Plain Vanilla Ones
In a lowrate environment, it's tempting to go for higher yield bonds. However, you might be better off sticking with the plain vanilla ones. 
Professionals
Interest Rate and Equity Swaps
CFA Level 1  Interest Rate and Equity Swaps. Learn the components of plain vanilla interest rate swaps and equity swaps. Contains sample calculations finding the payments for each swap. 
Professionals
Currency Swaps
CFA Level 1  Currency Swaps. Discusses the features of a currency swap. Learn how comparative advantage affects the payments made during a swap agreement. 
Investing Basics
Different Types of Swaps
Investopedia explores the most common types of swap contracts. 
Investing
What Warren Buffet Calls "Weapons of Mass Destruction": Understanding the Swap Industry
A full analysis of how the swap industry works. 
Professionals
Swaps
CFA Level 1  Swaps. Learn how swaps can change the characteristics of assets or liabilities. Discusses the cash flows of interest rate and currency swaps.

What are interest rate swaps on the OTC market?
Learn about interest rate swaps and how they are traded over the counter, and understand the impact of DoddFrank on swaps ... Read Answer >> 
How do companies benefit from interest rate and currency swaps?
An interest rate swap involves the exchange of cash flows between two parties based on interest payments for a particular ... Read Answer >> 
Do interest rate swaps trade on the open market?
Learn how interest rate swaps are traded on the OTC and interbank markets, and how these swaps can be used to arbitrage different ... Read Answer >> 
What is the difference between derivatives and swaps?
Find out more about derivative securities, swaps, examples of derivatives and swaps, and the main difference between derivative ... Read Answer >> 
Can bond traders trade on interest rate swaps?
Read about interest rate swaps and why these transactions are performed by institutional actors in the bond market, not individual ... Read Answer >> 
What would motivate an entity to enter into a swap agreement?
Learn why parties enter into swap agreements to hedge their risks, and understand how the different legs of a swap agreement ... Read Answer >>