Conversion Parity Price

Filed Under » ,
Dictionary Says

Definition of 'Conversion Parity Price'

The price paid for a share of stock purchased by exercising the option on a convertible security. The conversion parity price is the effective price paid by the investor, and is calculated by dividing the market price of the convertible security by the conversion ratio, which is the number of shares a convertible security can be converted into.
Investopedia Says

Investopedia explains 'Conversion Parity Price'

For example, a convertible bond with a par value of $1,000 and can be exchanged for 20 shares of common stock. The conversion parity price would be $50 ($1,000/20 shares). Investors can limit risk by purchasing a convertible security when the conversion parity price is close to the market price for the common stock, and the price of the common stock is expected to rise in the future.

Articles Of Interest

  1.

    Are High-Yield Bonds Too Risky?

    Despite their reputation, the debt securities known as "junk bonds" may actually reduce risk in your portfolio.

  2. A Primer On Preferred Stocks

    Offering both income and relative security, these uncommon shares may work for you.

  3. Introduction To Convertible Preferred Shares

    These securities offer an answer for investors who want the profit potential of stocks but not the risk.

  4. Convertible Bonds: Pros And Cons For Companies And Investors

    Find out why businesses choose this type of financing and what effect this has on investors.

  5. The Mandatory Convertible: A "Must Have" For Your Portfolio?

    Mandatory convertibles are a little understood security with some distinct advantages. Find out if they are right for you.

  6. Break Into Forex In 12 Steps

    Learn how to get started in forex trading.

  7. Why Your Pension Plan Has Sovereign Debt In It

    One type of security pensions tend to invest in is sovereign debt, or debt issued by a government.

  8. Should You Add A Securities License To Your Qualifications?

    Clients love planners who sell securities, but a securities license takes a lot of work. Learn if the stress and study are worth it.

  9. The Best Way To Buy Silver

    Discover whether ETFs or physical bullion is the best way for investors to get exposure to silver.

  10. 6 Popular ETF Types For Your Portfolio

    Exchange traded funds are an extremely popular diversification tool that can protect your portfolio during troubled periods.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Zomma

    An options greek used to measure the change in gamma in relation to changes in the volatility of the underlying asset.

  2. Yield Elbow

    The point on the yield curve indicating the year in which the economy's highest interest rates occur. The yield elbow is the peak of the yield curve, signifying where the highest interest rates occurred.

  3. Xenocurrency

    A currency that trades in markets outside of its domestic borders.

  4. Wanton Disregard

    A standard of severe negligence. Wanton disregard is a very serious accusation that indicates that a person behaved extremely recklessly.

  5. Ultra ETF

    A class of exchange-traded funds (ETF) that employs leverage in an effort to achieve double the return of a set benchmark.

  6. Toehold Purchase

    A purchase of less than 5% of a target company's outstanding stockmade by an acquiring company. A toehold purchase of just under 5%, while not a significant stake in a firm, allows the shareholders a "toe-holds" grip on the company and its decision making.
Trading Center
http://sp.fastclick.net/ad/tr/10858-64082-15546-0?mpt=03b7e148015c4ae816e7871d1e8e6fbf