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Definition of 'Plain Vanilla Swap'
The most basic type of forward claim that is traded in the over-the-counter 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.
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Investopedia explains '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 interest-rate risk.
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Search results for 'Plain Vanilla Swap'
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http://www.investopedia.com/articles/optioninvestor/07/swaps.asp
... In a plain vanilla swap, the two cash flows are paid in the same currency. ... Figure
2: Cash flows for a plain vanilla currency swap, Step 1. ...
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http://www.investopedia.com/articles/trading/11/introduction-swap-market.asp
... Types of Swaps: Plain Vanilla Swaps To better understand swaps we will take
a closer look at how a plain vanilla swap works. Plain ...
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http://www.investopedia.com/articles/forex/11/introduction-currency-swaps.asp
... Currency Swap Basics There are a few basic considerations that differentiate
plain vanilla currency swaps from other types of swaps. ...
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http://www.investopedia.com/exam-guide/cfa-level-1/derivatives/interest-rate-equity-swaps.asp
Learn the components of plain vanilla interest rate swaps and equity swaps. Contains
sample calculations finding the payments for each swap. ...
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http://www.investopedia.com/articles/optioninvestor/08/manage-interest-rate-risk.asp
... The most common type of interest rate swap is a plain vanilla swap, which involves
one party paying a fixed interest rate and receiving a floating rate and the ...
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http://www.investopedia.com/articles/optioninvestor/10/derivatives-101.asp
... as the fixed rate. . A "plain vanilla" swap is a term used for the simplest
variation of a swap. There are many different types ...
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http://www.investopedia.com/articles/forex/11/hedging-with-currency-swaps.asp
... foreign currency. Recall our plain vanilla currency swap example using
the US company and the German company. There are several ...
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http://www.investopedia.com/articles/optioninvestor/11/understanding-counterparty-risk.asp
... Understanding Counterparty Risk with an Interest Rate Swap Example Let's assume
two banks enter into a vanilla (non-exotic) interest rate swap. ...
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http://www.investopedia.com/exam-guide/cfa-level-1/derivatives/what-is-a-derivative.asp
... Call Parity; 15.35 Effect of Cash Flows on Put-Call Parity and the Lower Bounds;
15.36 Swap Markets and Contracts; 15.37 Currency Swaps; ...
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