Plain-Vanilla Swap Law and Legal Definition

Plain-vanilla swap refers to an interest rate that involves counterparty’s payment of fixed interest rate. It is based on the amount of the principal of the underlying debt. The underlying debt is called the notional amount of the swap. Under plain-vanilla swap, interest payments are exchanged. Generally, under plain-vanilla swap, the contract is between two parties to exchange or swap cash flows at specified intervals, calculated by reference to a particular rate or index.