Vanilla Option

Astandard option or other derivative. For example, ordinary puts and calls are ‘‘vanilla’’ options. All vanilla options share a few common characteristics: (i) one underlying asset; (ii) the effective starting time is present; (iii) only the price of the underlying asset at the option’s maturity affects the payoff of the option; (iv) whether an option is a call or a put is known when sold; and (v) the payoff is always the difference between the underlying asset price and the strike price, and so on. Vanilla options have many limitations resulting from their lack of flexibility. Each kind of exotic options, to some degree, overcomes one particular limitation of vanilla options.