Plain Vanilla refers to a simple or basic financial product or investment that does not have any additional features or complexity. It is used to contrast with more complex or exotic financial products that may have additional features or risks.For example, a plain vanilla bond is a basic bond that pays a fixed interest rate and is issued for a fixed period of time. It does not have any additional features, such as call options or conversion rights, that are found in more complex bonds.Similarly, a plain vanilla option is a basic option contract that gives the holder the right to buy or sell an underlying asset at a predetermined price on or before a certain date, without any additional features such as knock-out barriers or early exercise.Plain vanilla financial products are often seen as being less risky and more straightforward than more complex products, as they are easier to understand and evaluate. They are also often less expensive than more complex products, as they do not have the additional costs associated with the additional features.However, plain vanilla products may also be seen as less exciting or less rewarding than more complex products, as they may offer lower returns or fewer potential benefits. As a result, investors and traders may be more likely to choose more complex products in an effort to achieve higher returns or achieve specific investment goals.
