Vanilla Derivatives

Vanilla Derivatives Meaning:
In financial derivatives terminology, the term Vanilla Derivatives usually refers to relatively simple and common derivative contracts. Often, Vanilla Derivatives will be European-style options whose value at expiration will depend on that of some underlying asset.

Vanilla Derivatives Example:
For example, Vanilla Derivatives can usually be distinguished from Exotic Derivatives due to their simplicity and conformity with established market standards. Vanilla Derivatives will also tend to trade on tighter dealing spreads since they are the most liquid derivative contracts in the market. In the Over-the-Counter currency options market, for instance, Vanilla currency options will generally refer to European-style calls or puts. Such Vanilla Derivatives will commonly be distinguished from more Exotic currency options that include Knock Out Options, Knock In Options, Average Rate Options, Average Strike Options, Binary Options and Basket Options.