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Convertible

• Is a security which can be exercised into another security. Examples of convertibles are bonds, preferred stocks, warrants, and some swap agreements. Convertibles are related to options because they have specified spans for exercise, conversion price levels which approximate strike prices, and there are inherent premium structures. These premiums are related to volatility considerations.

 
 Embedded terms in definition
 Conversion price
Conversion
Exercise
Options
Preferred stock
Premium
Prices
Security
Strike price
Swap
Volatility
 
 Referenced Terms
 Blocked currency: A currency that is not freely Convertible to other currencies due to exchange controls.

 Bond value: With respect to Convertible bonds, the value the security would have if it were not convertible apart from the conversion option.

 Common stock equivalent: Abbreviated CSE. All contingent securities that derive a major portion of their value from their conversion privileges or common stock characteristics.A Convertible security that is traded like an equity issue because the optioned common stock is trading high.

 Conversion: Is the action of transforming a security into another security. A Convertible bond, when exercised, will convert into the stipulated number of common shares.

 Conversion factor: Rules set by the Chicago Board of Trade for determining the invoice price of each acceptable deliverable Treasury issue against the Treasury Bond futures contract.For the credit futures markets, it is the number that relates different coupons and acceptable deliverable maturities for delivery against the contract standard of an 8 percent coupon and the stipulated acceptable time remaining to maturity specifications. For the security markets, it is the contractual number that indicates how many shares a Convertible security can be exercised into at any point in time.

 
 Related Terms
 Busted convertible
Convertible bond
Convertible eurobond
Convertible exchangeable preferred stock
Convertible preferred
Convertible preferred shares
Convertible preferred stock
Convertible price
Convertible securities hedge funds
Convertible security
Market premium convertible securities

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