1502:. For countries, such as the UK, where companies are subject to limits on the number of shares that can be offered to non-shareholders non-pre-emptively, convertibles can raise more money than via equity issues. Under the UK's 1989 Guidelines issued by the Investor Protection Committees (IPCs) of the Association of British Insurers (ABI) and the National Association of Pension Fund Managers (NAPF), the IPCs will advise their members not to object to non pre-emptive issues which add no more than 5pct to historic non-diluted balance sheet equity in the period from AGM to AGM, and no more than 7.5pct in total over a period of 3 financial years. The pre-emption limits are calculated on the assumption of 100pct probability of conversion, using the figure of undiluted historic balance sheet share capital (where there is assumed a 0pct probability of conversion). There is no attempt to assign probabilities of conversion in both circumstances, which would result in bigger convertible issues being permitted. The reason for this inconsistency may lie in the fact that the Pre Emption Guidelines were drawn up in 1989, and binomial evaluations were not commonplace amongst professional investors until 1991–92.
1205:
higher the volatility, the flatter is the bell-shape. Where there are issuer calls and investor puts, these will affect the expected residual period of optionality, at different share price levels. The binomial value is a weighted expected value, (1) taking readings from all the different nodes of a lattice expanding out from current prices and (2) taking account of varying periods of expected residual optionality at different share price levels. The three biggest areas of subjectivity are (1) the rate of volatility used, for volatility is not constant, and (2) whether or not to incorporate into the model a cost of stock borrow, for hedge funds and market-makers. The third important factor is (3) the dividend status of the equity delivered, if the bond is called, as the issuer may time the calling of the bond to minimise the dividend cost to the issuer.
1529:. Convertibles have a place as the currency used in takeovers. The bidder can offer a higher income on a convertible than the dividend yield on a bid victim's shares, without having to raise the dividend yield on all the bidder's shares. This eases the process for a bidder with low-yield shares acquiring a company with higher-yielding shares. Perversely, the lower the yield on the bidder's shares, the easier it is for the bidder to create a higher conversion premium on the convertible, with consequent benefits for the mathematics of the takeover. In the 1980s, UK domestic convertibles accounted for about 80pct of the European convertibles market, and over 80pct of these were issued either as takeover currency or as funding for takeovers. They had several cosmetic attractions.
1020:: The non-dilutive feature has been popularised with the lower interest rates (e.g. in Euro) in order to make convertible issuance still attractive for issuers already benefitting from low interest charges in the straight bond market. In a non-dilutive placement, the issuer would simultaneously enter in an OTC option agreement with the underwriter (or a third party). This option would often match the strike of the convertible as well as its maturity. This would result in cancelling out the dilution in case of a conversion of the convertible at maturity if the stock price is above the strike. Typically, in order to fully prevent dilution the convertible prospectus would constraint possibility of early conversion.
36:
986:: The ability of the issuer (on some bonds) to call a bond early for redemption. This should not be mistaken for a call option. A Softcall would refer to a call feature where the issuer can only call under certain circumstances, typically based on the underlying stock price performance (e.g. current stock price is above 130% of the conversion price for 20 days out of 30 days). A Hardcall feature would not need any specific conditions beyond a date: that case the issuer would be able to recall a portion or the totally of the issuance at the Call price (typically par) after a specific date.
1049:: European, Middle Eastern and African issuances are trading usually out of Europe, London being the biggest node followed by Paris and to a lesser extent Frankfurt and Geneva. It represents about 25% of the global market and shows a greater diversity in terms of structures (e.g. from CoCoCo's to French OCEANE). Because of that lack of standardisation, it is often considered to be more technical and unforgiving than the American market from a trading perspective. A very tiny amount of the volumes is traded on exchange while the vast majority is done
1573:. The market for convertibles is primarily pitched towards the non taxpaying investor. The price will substantially reflect (1) the value of the underlying shares, (2) the discounted gross income advantage of the convertible over the underlying shares, plus (3) some figure for the embedded optionality of the bond. The tax advantage is greatest with mandatory convertibles. Effectively a high tax-paying shareholder can benefit from the company securitising gross future income on the convertible, income which it can offset against taxable profits.
998:(aka CoCo): Restrict the ability of the convertible bondholders to convert into equities. Typically, restrictions would be based on the underlying stock price and/or time (e.g. convertible every quarter if stock price is above 115% of the conversion price). Reverse convertibles in that respect could be seen as a variation of a Mandatory bearing a contingent conversion feature based. More recently some CoCo's issuances have been based on Tier-1 capital ratio for some large bank issuers.
850:
Most reverse convertibles are synthetics. Synthetics are more similar to structured products with settlement done in cash and no equities being produced as the result of a conversion. The
Packaged Convertibles (e.g. Siemens 17 DE000A1G0WA1) are sometimes confused with synthetics due to the fact an issuer (sometime a portfolio manager) will create a structure using straight bonds and options. There are in reality two completely different products with different risks and payoffs.
782:" option strategy. The first conversion price would limit the price where the investor would receive the equivalent of its par value back in shares, the second would delimit where the investor will earn more than par. If the stock price is below the first conversion price the investor would suffer a capital loss compared to its original investment (excluding the potential coupon payments). Mandatory convertibles can be compared to forward selling of equity at a premium.
942:: the difference between the market conversion price and the current market price of the underlying stock. Convertible bond buyers accept a conversion premium in exchange for the downside protection provided by a convertible bond's fixed income characteristics. As the stock price declines, the price of the convertible bond will not drop below its bond floor value. Usually expressed as on a per-share basis, the market conversion premium is calculated as follows:
1071:
referred to as being "on swap". Hedged investors would modulate their different risks (e.g. Equity, Credit, Interest-Rate, Volatility, Currency) by putting in place one or more hedge (e.g. Short Stock, CDS, Asset Swap, Option, Future). Inherently, market-makers are hedged investors as they would have a trading book during the day and/or overnight held in a hedged fashion to provide the necessary liquidity to pursue their market making operations.
909:: The price that the convertible investor effectively pays for the right to convert to common stock. It is calculated as shown below. Once the actual market price of the underlying stock exceeds the market conversion price embedded in the convertible, any further rise in the stock price will drive up the convertible security's price by at least the same percentage. Thus, the market conversion price can be thought of as a "break-even point."
552:
3239:
3229:
769:
maturity date where the nominal value of the bond is redeemable by the holder. This type is the most common convertible type and is typically providing the asymmetric returns profile and positive convexity often wrongly associated to the entire asset class: at maturity the holder would indeed either convert into shares or request the redemption at par depending on whether or not the stock price is above the conversion price.
1445:. For a finance director watching the trend in interest rates, there is an attraction in trying to catch the lowest point in the cycle to fund with fixed rate debt, or swap variable rate bank borrowings for fixed rate convertible borrowing. Even if the fixed market turns, it may still be possible for a company to borrow via a convertible carrying a lower coupon than ever would have been possible with straight debt funding.
1014:): Conversion price would be readjusted in case of a take-over on the underlying company. There are many subtype of ratchet formula (e.g. Make-whole base, time dependent...), their impact for the bondholder could be small (e.g. ClubMed, 2013) to significant (e.g. Aegis, 2012). Often, this clause would grant as well the ability for the convertible bondholders to "put" i.e. ask for the early repayment of their bonds.
1458:. Similarly, the conversion price a company fixes on a convertible can be higher than the level that the share price ever reached recently. Compare the equity dilution on a convertible issued on, say, a 20 or 30pct premium to the higher equity dilution on a rights issue, when the new shares are offered on, say, a 15 to 20pct discount to the prevailing share price.
1471:. With a convertible bond, dilution of the voting rights of existing shareholders only happens on eventual conversion of the bond. However convertible preference shares typically carry voting rights when preference dividends are in arrears. Of course, the bigger voting impact occurs if the issuer decides to issue an exchangeable rather than a convertible.
1516:
maturity date, the issuer will have benefited by having issued the bonds on a low or even zero-coupon. The higher the premium redemption price, (1) the more the shares have to travel for conversion to take place before the maturity date, and (2) the lower the conversion premium has to be at issue to ensure that the conversion rights are credible.
1062:
issuers. One key specificity of the
Japanese market is the offering price of issuance being generally above 100, meaning the investor would effectively bear a negative yield to benefit from the potential equity underlying upside. Most of the trading is done out of Tokyo (and Hong-Kong for some international firms).
1177:. However, this method ignores certain market realities including stochastic interest rates and credit spreads, and does not take into account popular convertible features such as issuer calls, investor puts, and conversion rate resets. The most popular models for valuing convertibles with these features are
751:, as a form of debt that converts to equity in a future investing round. It is a hybrid investment vehicle, which carries the (limited) protection of debt at the start, but shares in the upside as equity if the startup is successful, while avoiding the necessity of valuing the company at too early a stage.
1534:
The pro-forma fully diluted earnings per share shows none of the extra cost of servicing the convertible up to the conversion day irrespective of whether the coupon was 10pct or 15pct. The fully diluted earnings per share is also calculated on a smaller number of shares than if equity was used as the
1074:
Long-only/Outright
Investors: Convertible investors who will own the bond for their asymmetric payoff profiles. They would typically be exposed to the various risk. Global convertible funds would typically hedged their currency risk as well as interest rate risk in some occasions, however Volatility,
777:
Mandatory convertibles are a common variation of the vanilla subtype, especially on the US market. Mandatory convertible would force the holder to convert into shares at maturity—hence the term "Mandatory". Those securities would very often bear two conversion prices, making their profiles similar to
1029:
The global convertible bond market is relatively small, with about 400 bn USD (as of Jan 2013, excluding synthetics). As a comparison, the straight corporate bond market would be about 14,000 bn USD. Among those 400 bn, about 320 bn USD are "Vanilla" convertible bonds, the largest sub-segment of the
849:
convertible bond issued by an investment bank to replicate a convertible payoff on a specific underlying equity. Sometimes referred also as Cash settled Bank
Exchangeable Bonds (e.g. Barclays/MSFT 25 US06738G8A15 - Barclays Bank PLC is the issuer while Microsoft is the referenced underlying equity).
1204:
and from home-developed models, amongst others. These models needed an input of credit spread, volatility for pricing (historic volatility often used), and the risk-free rate of return. The binomial calculation assumes there is a bell-shaped probability distribution to future share prices, and the
1070:
Hedged/Arbitrage/Swap investors: Proprietary trading desk or hedged-funds using as core strategy
Convertible Arbitrage which consists in, for its most basic iteration, as being long the convertible bonds while being short the underlying stock. Buying the convertible while selling the stock is often
712:
rate lower than that of similar, non-convertible debt. The investor receives the potential upside of conversion into equity while protecting downside with cash flow from the coupon payments and the return of principal upon maturity. These properties—and the fact that convertible bonds trade often
1559:
The cosmetic benefits in (1) reported pro-forma diluted earnings per share, (2) debt gearing (for a while) and (3) pro-forma consolidated pre-tax profits (for convertible preference shares) led to UK convertible preference shares being the largest
European class of convertibles in the early 1980s,
1230:
or common shares for the investor. They provide asset protection, because the value of the convertible bond will only fall to the value of the bond floor: however in reality if stock price falls too much the credit spread will increase and the price of the bond will go below the bond floor. At the
1037:
North
America: About 50% of the global convertible market, mostly from the USA (even if Canada is well represented in the Material sector). This market is more standardised than the others with convertible structures being relatively uniform (e.g. Standard Make-Whole take over features, Contingent
837:
Exchangeable bond where the issuing company and the underlying stock company are different companies (e.g. XS0882243453, GBL into GDF Suez). This distinction is usually made in terms of risk i.e. equity and credit risk being correlated: in some cases the entities would be legally distinct, but not
799:
Packaged convertibles or sometimes "bond + option" structures are simply a straight bond and a call option/warrant wrapped together. Usually the investor would be able to then trade both legs separately. Although the initial payoff is similar to a plain vanilla one, the
Packaged Convertibles would
1213:
Convertible bonds are mainly issued by start-up or small companies. The chance of default or large movement in either direction is much higher than well-established firms. Investors should have a keen awareness of significant credit risk and price swing behavior associated with convertible bonds.
768:
Vanilla convertible bonds are the most plain convertible structures. They grant the holder the right to convert into a certain number of shares determined according to a conversion price determined in advance. They may offer coupon regular payments during the life of the security and have a fixed
1540:
In some countries (such as
Finland) convertibles of various structures may be treated as equity by the local accounting profession. In such circumstances, the accounting treatment may result in less pro-forma debt than if straight debt was used as takeover currency or to fund an acquisition. The
790:
Reverse convertibles are a less common variation, mostly issued synthetically. They would be opposite of the vanilla structure: the conversion price would act as a knock-in short put option: as the stock price drops below the conversion price the investor would start to be exposed the underlying
1157:
This volatility/credit dichotomy is the standard practice for valuing convertibles. What makes convertibles so interesting is that, except in the case of exchangeables (see above), one cannot entirely separate the volatility from the credit. Higher volatility (a good thing) tends to accompany
1515:
such as the majority of French convertibles and zero-coupon Liquid Yield Option Notes (LYONs), provide a fixed interest return at issue which is significantly (or completely) accounted for by the appreciation to the redemption price. If, however, the bonds are converted by investors before the
1061:
Japan: This region represents about 8% of the total market as of
January 2013 in spite of being in the past comparable in size to the Northern American market. It mostly shrunk because of the low interest environment making the competitive advantage of lowering coupon payment less appealing to
800:
then have different dynamics and risks associated with them since at maturity the holder would not receive some cash or shares but some cash and potentially some share. They would for instance miss the modified duration mitigation effect usual with plain vanilla convertibles structures.
992:: The ability of the holder of the bond (the lender) to force the issuer (the borrower) to repay the loan at a date earlier than the maturity. These often occur as windows of opportunity, every three or five years and allow the holders to exercise their right to an early repayment.
1042:
which helps in terms of price transparency. One other particularity of this market is the importance of the Mandatory Convertibles and Preferred especially for Financials (about 10–20% of the issuances in the US regional benchmarks). Most of the trading operation are based in
1004:: Conversion price would be reset to a new value depending on the underlying stock performance. Typically, would be in cases of underperformance (e.g. if stock price after a year is below 50% of the conversion price the new conversion price would be the current stock price).
868:: The date on which the principal (par value) of the bond (and all remaining interest) are due to be paid. In some cases, for non-vanilla convertible bonds, there is no maturity date (i.e. perpetual), this is often the case with preferred convertibles (e.g. US0605056821).
1079:
The splits between those investors differ across the regions: In 2013, the American region was dominated by Hedged Investors (about 60%) while EMEA was dominated by Long-Only investors (about 70%). Globally the split is about balanced between the two categories.
1053:
without a price reporting system (e.g. like TRACE). Liquidity is significantly lower than on the Northern American market. Trading convention are NOT uniform: French Convertibles would trade dirty in units while the others countries would trade clean in notional
759:
Underwriters have been quite innovative and provided several variations of the initial convertible structure. Although no formal classification exists in the financial market it is possible to segment the convertible universe into the following sub-types:
1158:
weaker credit (bad). In the case of exchangeables, the credit quality of the issuer may be decoupled from the volatility of the underlying shares. The true artists of convertibles and exchangeables are the people who know how to play this balancing act.
880:: Yield of the convertible bond at the issuance date, could be different from the coupon value if the bond is offering a premium redemption. In those cases the yield value would determine the premium redemption value and intermediary put redemption value.
1488:
and the cost of debt. Convertibles can provide additional funding when the straight debt “window” may not be open. Subordination of convertible debt is often regarded as an acceptable risk by investors if the conversion rights are attractive by way of
707:
because the companies agree to give fixed or floating interest rate as they do in common bonds for the funds of investor. To compensate for having additional value through the option to convert the bond to stock, a convertible bond typically has a
1057:
Asia (ex Japan): This region represents about 17% of the total market, with an overall structure similar to the EMEA market albeit with more standardisation across the issuances. Most of the trading is done in Hong-Kong with a minor portion in
1312:
838:
considered as exchangeable as the ultimate guarantor being the same as the underlying stock company (e.g. typical in the case of the Sukuk, Islamic convertible bonds, needing a specific legal setup to be compliant with the Islamic law).
814:
Contingent convertibles are a variation of the mandatory convertibles. They are automatically converted into equity if a pre-specified trigger event occurs, for example if the value of assets is below the value of its guaranteed debt.
890:
value, this is the value of a convertible bond's fixed income elements (regular interest payments, payment of principal at maturity and a superior claim on assets compared to common stock) excluding the ability to convert into
1484:. Convertibles can be used to increase the total amount of debt a company has in issue. The market tends to expect that a company will not increase straight debt beyond certain limits, without it negatively impacting upon the
902:
The conversion ratio is the number of shares the investor receives when exchanging the bond for common stock. The conversion price is the price paid per share to acquire the shares when exchanging the bond for common
975:: Immediate value of the convertible if converted, typically obtained as current stock price multiplied by the conversion ratio expressed for a base of 100. May also be known as Exchange Property.
1554:
Nevertheless, none of the (possibly substantial) preference dividend cost incurred when servicing a convertible preference share is visible in the pro-forma consolidated pretax profits statement.
1560:
until the tighter terms achievable on Euroconvertible bonds resulted in Euroconvertible new issues eclipsing domestic convertibles (including convertible preference shares) from the mid 1980s.
724:
payment. The advantage for companies of issuing convertible bonds is that, if the bonds are converted to stocks, companies' debt vanishes. However, in exchange for the benefit of reduced
2643:
1381:
1349:
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1549:(IASB) put a stop to treating convertible preference shares as equity. Instead it has to be classified both as (1) preference capital and as (2) convertible as well.
1154:
Using the market price of the convertible, one can determine the implied volatility (using the assumed spread) or implied spread (using the assumed volatility).
1150:
the credit spread for the fixed income portion that takes into account the firm's credit profile and the ranking of the convertible within the capital structure.
2636:
2609:
791:
stock performance and no longer able to redeem at par its bond. This negative convexity would be compensated by a usually high regular coupon payment.
2629:
2179:
829:
Foreign currency convertibles are any convertible bonds whose face value is issued in a currency different from issuing company's domestic currency.
1432:. Convertible bonds allow issuers to issue debt at a lower cost. Typically, a convertible bond at issue yields 1% to 3% less than straight bonds.
703:
Convertible bonds are most often issued by companies with a low credit rating and high growth potential. Convertible bonds are also considered
1410:, thus depressing the market value for a stock, and allowing the debt-holder to claim more stock with which to sell short. This is known as
1234:
Also, convertible bonds are usually less volatile than regular shares. Indeed, a convertible bond behaves like a call option. Therefore, if
1542:
1178:
533:
2597:
1395:
The simultaneous purchase of convertible bonds and the short sale of the same issuer's common stock is a hedge fund strategy known as
2183:
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1546:
1196:
Since 1991–92, most market-makers in Europe have employed binomial models to evaluate convertibles. Models were available from
616:
2210:
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2043:
Ammann, Manuel; Kind, Axel; Wilde, Christian (2003). "Are Convertible Bonds Underpriced?: An Analysis of the French Market".
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Ammann, Manuel; Kind, Axel; Wilde, Christian (2003). "Are Convertible Bonds Underpriced?: An Analysis of the French Market".
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862:: Periodic interest payment paid to the convertible bond holder from the issuer. Could be fixed or variable or equal to zero.
588:
400:
2533:
1223:
Convertible bonds are usually issued offering a higher yield than obtainable on the shares into which the bonds convert.
595:
2528:
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1957:
1932:
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874:: Final date at which the holder can request the conversion into shares. Might be different from the redemption date.
635:
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1399:. The motivation for such a strategy is that the equity option embedded in a convertible bond is a source of cheap
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From the issuer's perspective, the key benefit of raising money by selling convertible bonds is a reduced cash
573:
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2079:
1541:
perception was that gearing was less with a convertible than if straight debt was used instead. In the UK the
1033:
Convertibles are not spread equally and some slight differences exist between the different regional markets:
3169:
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A simple method for calculating the value of a convertible involves calculating the present value of future
2963:
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717:, where a long position in the convertible bond is balanced by a short position in the underlying equity.
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Conversion @ 130%). Regarding the trading, the American convertible market is "centralised" around
1214: Consequently, Valuation models need to capture credit risk and handle potential price jump.
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with debt- and equity-like features. It originated in the mid-19th century, and was used by early
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1307:{\displaystyle \Delta ={\frac {\delta C}{\delta S}}\Rightarrow \delta C=\Delta \times \delta S.}
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Convertible bond investors get split into two broad categories: Hedged and Long-only investors.
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1886:"Understanding Venture Capital Structure: A Tax Explanation for Convertible Preferred Stock"
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Equity & Credit hedging would typically be excluded from the scope of their strategy.
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2182:. Explains both plain convertible debt and a simplified form of convertible debt called
1822:
A Financial History of the United States: From Christopher Columbus to the Robber Barons
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same time, convertible bonds can provide the possibility of high equity-like returns.
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Market conversion premium per share = market conversion price - current market price
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Convertible Note Term Sheet Generator from Wilson Sonsini Goodrich & Rosati
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Market conversion price = market price of convertible bond / conversion ratio
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Journal of Derivatives & Hedge Funds, volume 19, issue 4. Pages 259–277.
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From a valuation perspective, a convertible bond consists of two assets: a
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Pricing Convertible Bonds using Partial Differential Equations – by Lucy Li
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A simple and precise method for pricing convertible bonds with credit risk.
1927:(third ed.). Upper Saddle River, NJ: Prentice-Hall, Inc. p. 376.
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Harvard i-lab | Foundations of Financings and Capital Raising for Startups
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Pricing Inflation-Indexed Convertible Bonds – by Landskroner and Raviv
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2003:"Cocos: Contingent Convertible Capital Notes and Insurance Reserves"
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payments, the value of shareholder's equity is reduced due to the
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that the holder can convert into a specified number of shares of
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The Handbook of Fixed Income Securities, Frank J. Fabozzi ed
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if it has a maturity of greater than 10 years) is a type of
1406:
In limited circumstances, certain convertible bonds can be
370:
1456:
Higher conversion price than a rights issue strike price
1450:
Higher conversion price than a rights issue strike price
1147:
the underlying stock volatility to value the option and
1102:
of a convertible debenture should never drop below its
853:
2610:
Securities Industry and Financial Markets Association
2078:
Ammann, Manuel; Kind, Axel; Wilde, Christian (2007).
1403:, which can be exploited by convertible arbitrageurs.
1357:
1325:
1250:
1131:
Out-the-money: Conversion Price is > Equity Price.
1125:
In-the-money: Conversion Price is < Equity Price.
1121:
The 3 main stages of convertible bond behaviour are:
1952:(5th ed.). New York: McGraw Hill. p. 296.
1500:
Maximising funding permitted under pre-emption rules
1494:
Maximising funding permitted under pre-emption rules
2134:
Bond valuation practical guide and calculator tool.
1423:
1143:. Valuing a convertible requires an assumption of
576:. Unsourced material may be challenged and removed.
1506:
1375:
1343:
1306:
1128:At-the-money: Conversion Price is = Equity Price.
743:Convertible notes are also a frequent vehicle for
1578:2010 U.S. equity-linked underwriting league table
3255:
1819:
1094:Lattice model (finance) § Hybrid securities
1024:
818:
2142:Future Returns: The Case for Convertible Bonds.
2080:"Simulation-Based Pricing of Convertible Bonds"
2077:
2042:
1848:
1443:Locking into low fixed–rate long-term borrowing
1437:Locking into low fixed–rate long-term borrowing
1391:, which can be interpreted as less volatility.
1106:. The intrinsic value is simply the number of
979:Convertibles may have other features, such as:
713:below fair value—lead naturally to the idea of
1238:is the call price and S the regular share then
2637:
2204:
1883:
894:The issuance prospectus will state either a
527:
763:
2000:
1947:
1462:
3238:
3228:
2644:
2630:
2598:Commercial Mortgage Securities Association
2211:
2197:
1482:Increasing the total level of debt gearing
1476:Increasing the total level of debt gearing
1189:. However, also valuation models based on
803:
534:
520:
2184:SAFE (Simple Agreement for Future Equity)
2117:Lattice model (finance)#Hybrid securities
772:
636:Learn how and when to remove this message
2604:International Capital Market Association
1796:
1547:International Accounting Standards Board
794:
732:expected when bondholders convert their
1922:
1884:Gilson, Ronald; Schizer, David (2003).
785:
3256:
1383:, which implies that the variation of
2625:
2192:
1925:Bond Markets, Analysis and Strategies
1217:
1376:{\displaystyle \delta C<\delta S}
832:
574:adding citations to reliable sources
545:
2534:Commercial mortgage-backed security
1418:
1090:Bond option § Embedded options
854:Structure, features and terminology
13:
2529:Collateralized mortgage obligation
2125:
1332:
1289:
1251:
1173:and adds the present value of the
1114:times the current market price of
825:Foreign currency convertible bonds
14:
3290:
2158:
1564:
1520:
1344:{\displaystyle 0<\Delta <1}
1226:Convertible bonds are safer than
841:
680:or cash of equal value. It is a
3237:
3227:
1797:Scatizzi, Cara (February 2009).
1430:Lower fixed-rate borrowing costs
1424:Lower fixed-rate borrowing costs
550:
34:
2218:
2109:
2071:
2036:
2020:
1513:Premium redemption convertibles
1507:Premium redemption convertibles
561:needs additional citations for
277:Over-the-counter (off-exchange)
3024:Debtor-in-possession financing
2524:Collateralized debt obligation
2400:Reverse convertible securities
2045:Journal of Banking and Finance
1994:
1980:
1966:
1941:
1916:
1877:
1851:Journal of Banking and Finance
1842:
1813:
1790:
1616:Bank of America Merrill Lynch
1387:is less than the variation of
1277:
1:
2057:10.1016/S0378-4266(01)00256-4
2001:Hirst, Gary (June 21, 2013).
1948:Ritchie Jr., John C. (1997).
1863:10.1016/S0378-4266(01)00256-4
1783:
1025:Markets and investor profiles
819:Foreign currency convertibles
503:Sustainable development goals
2964:Staggered board of directors
2087:Journal of Empirical Finance
1083:
7:
3081:Accretion/dilution analysis
2340:Contingent convertible bond
2145:Barron's. December 3, 2019.
1753:Contingent convertible bond
1746:
1181:as well as the more common
810:Contingent convertible bond
10:
3295:
3044:Leveraged recapitalization
2380:Inverse floating rate note
1923:Fabozzi, Frank J. (1996).
1087:
822:
807:
3223:
3215:Valuation using multiples
3200:Sum-of-the-parts analysis
3170:Modigliani–Miller theorem
3071:
3029:Dividend recapitalization
3009:
2857:
2844:Secondary market offering
2747:
2736:
2663:
2590:
2547:
2511:
2413:
2307:
2249:
2226:
1820:Jerry W. Markham (2002).
940:Market conversion premium
764:Vanilla convertible bonds
386:Diversification (finance)
3233:List of investment banks
3148:Free cash flow to equity
2974:Super-majority amendment
2899:Management due diligence
2839:Seasoned equity offering
2539:Mortgage-backed security
2308:Types of bonds by payout
2250:Types of bonds by issuer
1469:Voting dilution deferred
1463:Voting dilution deferred
1200:, Trend Data of Canada,
1179:finite difference models
866:Maturity/redemption date
847:Synthetically structured
754:
2944:Shareholder rights plan
2934:Post-merger integration
2904:Managerial entrenchment
2874:Contingent value rights
2814:Initial public offering
1630:Goldman Sachs & Co
1208:
1008:Change of control event
907:Market conversion price
804:Contingent convertibles
3086:Adjusted present value
2949:Special-purpose entity
2787:Direct public offering
2757:At-the-market offering
2473:Option-adjusted spread
2375:Inflation-indexed bond
1778:Liquidation preference
1412:death spiral financing
1377:
1345:
1319:In consequence, since
1308:
773:Mandatory convertibles
351:Alternative investment
3101:Conglomerate discount
2519:Asset-backed security
2483:Weighted-average life
2320:Auction rate security
1397:convertible arbitrage
1378:
1346:
1309:
996:Contingent conversion
872:Final conversion date
795:Packaged convertibles
715:convertible arbitrage
666:convertible debenture
483:Investment management
396:Environmental finance
3123:Economic value added
3118:Discounted cash flow
2512:Securitized products
1763:Convertible security
1728:Jefferies Group Inc
1355:
1323:
1248:
786:Reverse convertibles
570:improve this article
2708:Senior secured debt
2289:Infrastructure bond
2095:10.2139/ssrn.762804
1799:"Convertible Bonds"
1191:Monte Carlo methods
1110:being converted at
508:Sustainable finance
22:Part of a series on
3243:Outline of finance
3155:Market value added
3138:Financial modeling
3096:Business valuation
3019:Debt restructuring
2797:Follow-on offering
2782:Corporate spin-off
2740:(terms/conditions)
2657:investment banking
2365:Floating rate note
1890:Harvard Law Review
1801:. The AAII Journal
1768:Equity-linked note
1535:takeover currency.
1373:
1341:
1304:
1218:Uses for investors
886:: Also known as
585:"Convertible bond"
498:Speculative attack
263:Structured product
3274:Corporate finance
3251:
3250:
3175:Net present value
3160:Minority interest
3091:Associate company
3067:
3066:
3034:Financial sponsor
2954:Special situation
2924:Pre-emption right
2914:Minority discount
2824:Private placement
2723:Subordinated debt
2678:Exchangeable debt
2665:Capital structure
2653:Corporate finance
2619:
2618:
2572:Exchangeable bond
2498:Yield to maturity
2350:Exchangeable bond
2272:Subordinated debt
2028:Dilutive security
1773:Exchangeable bond
1738:
1737:
1700:Barclays Capital
1658:Deutsche Bank AG
1591:Market share (%)
1275:
961:
960:
928:
927:
900:conversion price.
833:Exchangeable bond
749:startup companies
646:
645:
638:
620:
544:
543:
371:Banks and banking
361:Asset (economics)
187:Credit derivative
155:Stock certificate
28:Financial markets
3286:
3279:Embedded options
3269:Commercial bonds
3241:
3240:
3231:
3230:
3133:Fairness opinion
3128:Enterprise value
3111:Weighted average
3039:Leveraged buyout
2894:Drag-along right
2792:Equity carve-out
2749:Equity offerings
2745:
2744:
2741:
2713:Shareholder loan
2698:Second lien debt
2693:Preferred equity
2673:Convertible debt
2646:
2639:
2632:
2623:
2622:
2562:Convertible bond
2405:Zero-coupon bond
2345:Convertible bond
2330:Commercial paper
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1419:Uses for issuers
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1169:payments at the
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896:conversion ratio
698:market cornering
662:convertible debt
658:convertible note
654:convertible bond
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478:Impact investing
473:Growth investing
206:Foreign exchange
192:Futures exchange
140:Registered share
38:
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18:
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3264:Bonds (finance)
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3195:Stock valuation
3190:Residual income
3106:Cost of capital
3063:
3059:Project finance
3049:High-yield debt
3005:
2984:Tag-along right
2909:Mandatory offer
2879:Control premium
2860:
2853:
2829:Public offering
2777:Bought out deal
2739:
2738:
2732:
2659:
2650:
2620:
2615:
2586:
2577:Extendible bond
2567:Embedded option
2543:
2507:
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2370:High-yield debt
2360:Fixed rate bond
2355:Extendible bond
2303:
2284:Government bond
2279:Distressed debt
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2128:
2126:Further reading
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1917:
1902:10.2307/1342584
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1847:
1843:
1836:
1828:. p. 161.
1818:
1814:
1804:
1802:
1795:
1791:
1786:
1758:Preferred stock
1749:
1644:Morgan Stanley
1580:
1567:
1523:
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1324:
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1320:
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1259:
1257:
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1246:
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1220:
1211:
1193:are available.
1187:trinomial trees
1104:intrinsic value
1098:In theory, the
1096:
1086:
1027:
856:
844:
835:
827:
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812:
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682:hybrid security
676:in the issuing
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381:Climate finance
310:
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197:Hybrid security
135:Preferred stock
105:
96:High-yield debt
91:Government bond
17:
12:
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3210:Terminal value
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3143:Free cash flow
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3054:Private equity
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2690:
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2683:Mezzanine debt
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2478:Risk-free bond
2475:
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2465:
2463:Mortgage yield
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2419:
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2415:Bond valuation
2411:
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2390:Perpetual bond
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2262:Corporate bond
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2159:External links
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2051:(4): 635–653.
2035:
2019:
1993:
1990:. p. 376.
1988:Fabozzi op cit
1979:
1976:. p. 376.
1974:Fabozzi op cit
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1958:
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1915:
1896:(3): 874–916.
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1857:(4): 635–653.
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3032:
3030:
3027:
3025:
3022:
3020:
3017:
3016:
3014:
3012:
3008:
3002:
2999:
2995:
2992:
2991:
2990:
2987:
2985:
2982:
2980:
2977:
2975:
2972:
2970:
2967:
2965:
2962:
2960:
2957:
2955:
2952:
2950:
2947:
2945:
2942:
2940:
2937:
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2932:
2930:
2927:
2925:
2922:
2920:
2917:
2915:
2912:
2910:
2907:
2905:
2902:
2900:
2897:
2895:
2892:
2890:
2887:
2885:
2882:
2880:
2877:
2875:
2872:
2870:
2867:
2866:
2864:
2862:
2856:
2850:
2847:
2845:
2842:
2840:
2837:
2835:
2832:
2830:
2827:
2825:
2822:
2820:
2817:
2815:
2812:
2808:
2805:
2804:
2803:
2800:
2798:
2795:
2793:
2790:
2788:
2785:
2783:
2780:
2778:
2775:
2773:
2770:
2768:
2765:
2763:
2762:Book building
2760:
2758:
2755:
2754:
2752:
2750:
2746:
2743:
2735:
2729:
2726:
2724:
2721:
2719:
2716:
2714:
2711:
2709:
2706:
2704:
2701:
2699:
2696:
2694:
2691:
2689:
2686:
2684:
2681:
2679:
2676:
2674:
2671:
2670:
2668:
2666:
2662:
2658:
2654:
2647:
2642:
2640:
2635:
2633:
2628:
2627:
2624:
2611:
2608:
2605:
2602:
2599:
2596:
2595:
2593:
2589:
2583:
2582:Puttable bond
2580:
2578:
2575:
2573:
2570:
2568:
2565:
2563:
2560:
2558:
2557:Callable bond
2555:
2554:
2552:
2550:
2546:
2540:
2537:
2535:
2532:
2530:
2527:
2525:
2522:
2520:
2517:
2516:
2514:
2510:
2504:
2501:
2499:
2496:
2494:
2491:
2489:
2486:
2484:
2481:
2479:
2476:
2474:
2471:
2469:
2468:Nominal yield
2466:
2464:
2461:
2459:
2456:
2454:
2451:
2449:
2446:
2444:
2443:Current yield
2441:
2439:
2438:Credit spread
2436:
2434:
2431:
2429:
2426:
2424:
2421:
2420:
2418:
2416:
2412:
2406:
2403:
2401:
2398:
2396:
2395:Puttable bond
2393:
2391:
2388:
2386:
2383:
2381:
2378:
2376:
2373:
2371:
2368:
2366:
2363:
2361:
2358:
2356:
2353:
2351:
2348:
2346:
2343:
2341:
2338:
2336:
2333:
2331:
2328:
2326:
2325:Callable bond
2323:
2321:
2318:
2316:
2313:
2312:
2310:
2306:
2300:
2297:
2295:
2292:
2290:
2287:
2285:
2282:
2280:
2277:
2273:
2270:
2268:
2265:
2264:
2263:
2260:
2258:
2255:
2254:
2252:
2248:
2242:
2239:
2237:
2234:
2232:
2229:
2228:
2225:
2221:
2214:
2209:
2207:
2202:
2200:
2195:
2194:
2191:
2185:
2181:
2178:
2176:
2173:
2171:
2168:
2166:
2163:
2162:
2153:
2152:
2147:
2144:
2143:
2138:
2136:
2135:
2130:
2129:
2118:
2112:
2104:
2100:
2096:
2092:
2088:
2081:
2074:
2066:
2062:
2058:
2054:
2050:
2046:
2039:
2033:
2029:
2023:
2008:
2007:garyhirst.com
2004:
1997:
1989:
1983:
1975:
1969:
1961:
1959:0-7863-1095-2
1955:
1951:
1944:
1936:
1934:0-13-339151-5
1930:
1926:
1919:
1911:
1907:
1903:
1899:
1895:
1891:
1887:
1880:
1872:
1868:
1864:
1860:
1856:
1852:
1845:
1837:
1835:0-7656-0730-1
1831:
1827:
1823:
1816:
1800:
1793:
1789:
1779:
1776:
1774:
1771:
1769:
1766:
1764:
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1719:
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1626:
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1621:
1618:
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1611:
1607:
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1601:
1598:
1597:
1594:Amount ($ m)
1593:
1590:
1587:
1584:
1583:
1572:
1569:
1568:
1558:
1557:
1553:
1552:
1548:
1544:
1539:
1538:
1533:
1532:
1528:
1525:
1524:
1514:
1511:
1510:
1501:
1498:
1497:
1489:compensation.
1487:
1486:credit rating
1483:
1480:
1479:
1470:
1467:
1466:
1457:
1454:
1453:
1444:
1441:
1440:
1431:
1428:
1427:
1413:
1409:
1405:
1402:
1398:
1394:
1393:
1392:
1390:
1386:
1370:
1367:
1364:
1361:
1358:
1338:
1335:
1329:
1326:
1301:
1298:
1295:
1292:
1286:
1283:
1280:
1271:
1268:
1263:
1260:
1254:
1244:
1243:
1242:
1241:
1237:
1233:
1229:
1225:
1222:
1221:
1215:
1206:
1203:
1199:
1194:
1192:
1188:
1184:
1180:
1176:
1172:
1168:
1164:
1159:
1155:
1149:
1146:
1145:
1144:
1142:
1138:
1130:
1127:
1124:
1123:
1122:
1119:
1117:
1116:common shares
1113:
1109:
1105:
1101:
1095:
1091:
1081:
1073:
1069:
1068:
1067:
1060:
1056:
1052:
1048:
1045:
1041:
1036:
1035:
1034:
1031:
1030:asset class.
1019:
1016:
1013:
1009:
1006:
1003:
1000:
997:
994:
991:
988:
985:
984:Call features
982:
981:
980:
974:
971:
970:
956:
955:
952:
951:
950:
949:
948:
947:
946:
945:
941:
938:
937:
923:
922:
919:
918:
917:
916:
915:
914:
913:
912:
908:
905:
901:
897:
893:
889:
888:straight bond
885:
882:
879:
876:
873:
870:
867:
864:
861:
858:
857:
851:
848:
839:
830:
826:
816:
811:
801:
792:
783:
781:
780:risk reversal
770:
761:
752:
750:
746:
741:
739:
735:
731:
727:
723:
718:
716:
711:
706:
705:debt security
701:
699:
695:
691:
687:
683:
679:
675:
671:
667:
663:
659:
655:
651:
640:
637:
629:
618:
615:
611:
608:
604:
601:
597:
594:
590:
587: –
586:
582:
581:Find sources:
575:
571:
565:
564:
559:This article
557:
553:
548:
547:
537:
532:
530:
525:
523:
518:
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461:
457:
454:
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447:
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437:
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432:
429:
427:
424:
422:
419:
417:
414:
412:
409:
408:
407:
404:
402:
399:
397:
394:
392:
391:Eco-investing
389:
387:
384:
382:
379:
377:
374:
372:
369:
367:
366:Asset pricing
364:
362:
359:
357:
354:
352:
349:
348:
347:
346:
343:Related areas
342:
341:
336:
333:
331:
328:
326:
323:
322:
321:
320:
317:
314:
313:
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256:
254:
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249:
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244:
241:
239:
236:
234:
231:
229:
226:
225:
219:
218:Exchange rate
216:
214:
210:
209:
207:
198:
195:
193:
190:
188:
184:
183:
181:
177:
176:
173:Other markets
172:
171:
166:
165:Watered stock
163:
161:
158:
156:
153:
151:
148:
146:
143:
141:
138:
136:
133:
131:
128:
126:
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113:
108:
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82:
79:
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72:
71:
68:
65:
64:
59:
56:
52:
49:
47:
46:Public market
44:
43:
42:
41:
37:
33:
32:
29:
26:
25:
21:
20:
3185:Real options
3001:Tender offer
2861:acquisitions
2849:Underwriting
2834:Rights issue
2737:Transactions
2672:
2591:Institutions
2561:
2549:Bond options
2493:Yield spread
2385:Lottery bond
2344:
2315:Accrual bond
2241:Fixed income
2150:
2141:
2139:Max, Kevin.
2133:
2131:FinPricing.
2111:
2086:
2073:
2048:
2044:
2038:
2022:
2010:. Retrieved
2006:
1996:
1987:
1982:
1973:
1968:
1949:
1943:
1924:
1918:
1893:
1889:
1879:
1854:
1850:
1844:
1826:M. E. Sharpe
1821:
1815:
1803:. Retrieved
1792:
1739:
1602:J.P. Morgan
1588:Underwriter
1570:
1526:
1512:
1499:
1481:
1468:
1455:
1442:
1429:
1388:
1384:
1318:
1235:
1212:
1202:Bloomberg LP
1195:
1171:cost of debt
1160:
1156:
1153:
1134:
1120:
1100:market price
1097:
1078:
1065:
1032:
1028:
1018:Non-dilutive
1017:
1007:
1001:
995:
990:Put features
989:
983:
978:
972:
939:
906:
899:
895:
887:
883:
877:
871:
865:
859:
845:
836:
828:
813:
798:
789:
776:
767:
758:
742:
719:
702:
690:Jacob Little
674:common stock
665:
661:
657:
653:
647:
632:
623:
613:
606:
599:
592:
580:
568:Please help
563:verification
560:
493:Market trend
468:Greenwashing
325:Participants
130:Growth stock
125:Common stock
116:Stock market
86:Fixed income
54:
16:Type of bond
2959:Squeeze-out
2929:Proxy fight
2859:Mergers and
2772:Bought deal
2703:Senior debt
2488:Yield curve
2448:Dirty price
2423:Clean price
2299:Global bond
2267:Senior debt
2257:Agency bond
2220:Bond market
2148:Xiao, Tim.
2032:Diluted EPS
1805:8 September
1734:$ 1,522.50
1720:$ 1,589.20
1706:$ 1,969.22
1692:$ 2,405.97
1678:$ 2,614.43
1664:$ 2,748.52
1650:$ 3,077.95
1636:$ 4,370.56
1622:$ 5,369.23
1608:$ 7,359.72
1543:predecessor
1054:equivalent.
696:to counter
694:Daniel Drew
686:speculators
626:August 2018
488:Market risk
301:Spot market
258:Reinsurance
253:Real estate
243:Mutual fund
180:Derivatives
150:Stockbroker
67:Bond market
3258:Categories
3205:Tax shield
3165:Mismarking
2969:Stock swap
2919:Pitch book
2889:Divestment
2767:Bookrunner
2688:Pari passu
1784:References
1408:sold short
1401:volatility
1088:See also:
1058:Singapore.
884:Bond floor
596:newspapers
330:Regulation
58:Securities
3180:Pure play
3073:Valuation
2939:Sell side
2802:Greenshoe
2428:Convexity
2236:Debenture
2103:233758183
2012:April 13,
1742:Bloomberg
1368:δ
1359:δ
1333:Δ
1296:δ
1293:×
1290:Δ
1281:δ
1278:⇒
1269:δ
1261:δ
1252:Δ
1228:preferred
1167:principal
1112:par value
1084:Valuation
1043:New-York.
891:equities.
736:into new
431:corporate
406:Financial
228:Commodity
3011:Leverage
2989:Takeover
2884:Demerger
2869:Buy side
2503:Z-spread
2458:I-spread
2453:Duration
1747:See also
1740:Source:
1163:interest
726:interest
722:interest
688:such as
456:services
446:personal
441:forecast
411:analysis
335:Clearing
287:Forwards
213:Currency
51:Exchange
2994:Reverse
2979:Synergy
2819:Pre-IPO
2807:Reverse
2728:Warrant
2612:(SIFMA)
1910:1342584
1545:to the
1351:we get
1175:warrant
1141:warrant
1012:Ratchet
678:company
650:finance
610:scholar
463:Fintech
426:betting
416:analyst
316:Trading
292:Options
2606:(ICMA)
2600:(CMSA)
2433:Coupon
2335:Consol
2101:
2065:268470
2063:
1956:
1931:
1908:
1871:268470
1869:
1832:
1198:INSEAD
1139:and a
1108:shares
1092:, and
973:Parity
903:stock.
860:Coupon
738:shares
710:coupon
664:(or a
612:
605:
598:
591:
583:
451:public
248:Option
53:
2718:Stock
2099:S2CID
2083:(PDF)
2026:See:
1906:JSTOR
1672:Citi
1633:12.5
1619:15.3
1605:21.0
1585:Rank
1040:TRACE
1010:(aka
1002:Reset
898:or a
878:Yield
755:Types
734:bonds
660:, or
617:JSTOR
603:books
436:crime
421:asset
306:Swaps
238:Money
145:Stock
2655:and
2231:Bond
2115:See
2061:SSRN
2030:and
2014:2014
1954:ISBN
1929:ISBN
1867:SSRN
1830:ISBN
1807:2015
1731:4.3
1717:4.5
1714:UBS
1703:5.6
1689:6.9
1675:7.5
1661:7.8
1647:8.8
1365:<
1336:<
1330:<
1209:Risk
1185:and
1165:and
1137:bond
1047:EMEA
692:and
670:bond
652:, a
589:news
376:Bull
2091:doi
2053:doi
1898:doi
1894:116
1859:doi
1725:10
1051:OTC
778:a "
747:in
648:In
572:by
401:ESG
233:ETF
3260::
2097:.
2089:.
2085:.
2059:.
2049:27
2047:.
2005:.
1904:.
1892:.
1888:.
1865:.
1855:27
1853:.
1824:.
1711:9
1697:8
1683:7
1669:6
1655:5
1641:4
1627:3
1613:2
1599:1
1118:.
740:.
700:.
656:,
2645:e
2638:t
2631:v
2212:e
2205:t
2198:v
2105:.
2093::
2067:.
2055::
2016:.
1962:.
1937:.
1912:.
1900::
1873:.
1861::
1838:.
1809:.
1414:.
1389:S
1385:C
1371:S
1362:C
1339:1
1327:0
1302:.
1299:S
1287:=
1284:C
1272:S
1264:C
1255:=
1236:C
639:)
633:(
628:)
624:(
614:·
607:·
600:·
593:·
566:.
535:e
528:t
521:v
220:)
211:(
199:)
185:(
55:·
Text is available under the Creative Commons Attribution-ShareAlike License. Additional terms may apply.
