What is vanilla option in finance?
A vanilla option is a financial instrument that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price within a given timeframe. A vanilla option is a call option or put option that has no special or unusual features.
What are the types of options?
The two most common types of options are calls and puts:
- Call options. Calls give the buyer the right, but not the obligation, to buy the underlying asset.
- Put options. Puts give the buyer the right, but not the obligation, to sell the underlying asset at the strike price specified in the contract.
What are exotics in finance?
In finance, an exotic option is an option which has features making it more complex than commonly traded vanilla options. An exotic option may also include non-standard underlying instrument, developed for a particular client or for a particular market.
What is vanilla insurance?
In plain-vanilla life insurance policies each and every benefit is predefined and disclosed upfront at the time of sale itself and is very simple to understand. The death and maturity benefits including return of premium will be paid only in one lumpsum.
What is a vanilla product?
In information technology, vanilla (pronounced vah-NIHL-uh ) is an adjective meaning plain or basic. The unfeatured version of a product is sometimes referred to as the vanilla version. The term is based on the fact that vanilla is the most popular or at least the most commonly served flavor of ice cream.
What are the two types of options in finance?
There are two types of options: calls and puts. Call options allow the option holder to purchase an asset at a specified price before or at a particular time. Put options are opposites of calls in that they allow the holder to sell an asset at a specified price before or at a particular time.
What are the options in finance?
Options are financial derivatives that give buyers the right, but not the obligation, to buy or sell an underlying asset at an agreed-upon price and date. Call options and put options form the basis for a wide range of option strategies designed for hedging, income, or speculation.
Is vanilla exotic?
Vanilla has been called the most universally loved flavor and scent. For Midwesterners, sensuous vanilla is about as exotic as you can get. It comes from the only orchid that bears edible fruit among thousands of orchid species, thriving only in tropical climates within 20 latitudinal degrees of the equator.
Why vanilla is not plain?
Banish the phrase “plain vanilla” from your lexicon. Why? Because vanilla is one of the most complex spices around, boasting at least 250 different flavor and aroma compounds, only one of which is vanillin, the stuff that can be made artificially in a lab (and is used in a lot of processed foods).
What are vanilla options and what do they do?
Vanilla options are financial instruments that enable purchase or sale of an underlying asset at a pre-determined strike price inside a defined timeframe. Call and put options, which give their owners the right, but not the obligation to buy or sell an underlying asset, comprise vanilla options.
What does plain vanilla mean in financial terms?
Plain vanilla signifies the most basic or standard version of a financial instrument, usually options, bonds, futures and swaps. Plain vanilla is the opposite of an exotic instrument, which alters the components of a traditional financial instrument, resulting in a more complex security.
Which is the opposite of plain vanilla software?
The opposite of plain vanilla options are exotic options. Vanilla software, is a computer software which is not customized. Vanilla sex, sexual behavior which a culture regards as standard or conventional. ^ plain vanilla in The American Heritage® Dictionary of the English Language: Fourth Edition. 2000.
What’s the difference between exotic and plain vanilla?
There are also plain vanilla commodity swaps and plain vanilla foreign currency swaps. In the financial world, the opposite of plain vanilla is exotic. So an exotic option involves much more complicated features or special circumstances that separate them from the more common American or European options.