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Mainly applies to convertible securities. Common stock price at which a convertible bond can become
exchangeable for common shares of equal value; value of a convertible bond based solely on the market
value of the underlying equity. Par value + conversion ratio. See bond value, investment value, parity.
Conversion parity price
Related: Market conversion price.
Conversion premium
The percentage by which the conversion price of a convertible security exceeds the prevailing common
stock price at the time the convertible security is issued.
Conversion price
Mainly applies to convertible securities. Dollar value at which convertible bonds, debentures, or preferred
stock can be converted into common stock, as announced when the convertible is issued.
Conversion ratio
Mainly applies to convertible securities. Relationship that determines how many shares of common stock will
be received in exchange for each convertible bond or preferred share when the conversion takes place. It is
determined at the time of issue and is expressed either as a ratio or as a conversion price from which the
ratio can be figured by dividing the par value of the convertible by the conversion price.
Conversion value
Also called parity value, the value of a convertible security if it is converted immediately.
Convertibility
The degree of freedom to exchange a currency without government restrictions or controls.
Convertible 100
Mainly applies to convertible securities. Goldman Sachs glossary of the 100 convertibles of greatest
institutional importance. Weighted by issue size, it measures the performance of its components against that
of their underlying common stock and against other broad market indices as well.
Convertible arbitrage
Mainly applies to convertible securities. A practice, usually of buying a convertible bond and shorting a
percentage of the equivalent underlying common shares to create a positive cash flow position (with
expected returns above the riskless rate) in a static environment and capital appreciation should the
convertibles premium expand. This form of investing is far from riskless and requires constant monitoring.
See: Chinese hedge and set up.
Convertible bond
Mainly applies to convertible securities. General debt obligation of a corporation which can be exchanged for
a set number of common shares of the issuing corporation at a prestated conversion price.
Convertible eurobond
A eurobond that can be converted into another asset, often through exercise of attached warrants.
Convertible exchangeable
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