Plain Vanilla is a term to describe any tradable asset, or financial instrument, in the financial world that is the simplest, most standard version of that asset. It can be applied to specific categories of financial instruments such as options or bonds, but can also be applied to trading strategies or modes of thinking in economics.
A Plain Vanilla Bond is a bond without any unusual features; it is one of the simplest forms of bond with a fixed coupon and a defined maturity and is usually issued and redeemed at the face value.
A Plain Vanilla Bond is also known as a straight bond or a bullet bond. Plain vanilla bonds are easier to trade, and they have tighter spreads.
- Perpetual bonds pay a coupon rate on the face value till the life of the company. Though perpetuity means forever, bonds with maturities above 100 years are also considered to be perpetual bonds.
- Perpetual bonds, which is also called as perpetual or just a perp, is a bond with no maturity date. Therefore, a perpetual bond may be treated as equity, and not as debt.
- Issuers pay coupons on perpetual bonds forever, and they do not have to redeem the principal.
- Perpetual bond cash flows are, therefore those of perpetuity.