The underlying variable of plain vanilla swaps is interest rates. Plain vanilla swaps, also known as interest rate swaps, are the most common type of swap agreement used worldwide. In these swaps, one party agrees to pay cash flows equal to a fixed interest rate set at a predetermined time, in exchange for a floating interest rate. This allows the parties involved to hedge against interest rate risk. The interest rate is the key variable that determines the cash flows in these swaps, making it the underlying variable of plain vanilla swaps.

Choice A is incorrect. While currency exchange rates are indeed an underlying variable in certain types of swaps, specifically currency swaps, they are not the underlying variable in plain vanilla swaps. Plain vanilla swaps typically involve the exchange of a fixed interest rate for a floating interest rate.

Choice C is incorrect. Volatility is not the underlying variable in plain vanilla swaps. It might be an important factor to consider when pricing or valuing derivatives such as options, but it does not directly underlie a plain vanilla swap agreement.

Choice D is incorrect. Equities can be an underlying asset for some types of derivative contracts like equity swaps or equity options, but they are not associated with plain vanilla interest rate swap agreements which primarily deal with exchanging cash flows based on different interest rates.