Conversion Value

AAA

DEFINITION of 'Conversion Value'

The financial worth of the securities obtained by exchanging a convertible security for its underlying assets. Convertibles are a category of financial instruments, such as convertible bonds and preferred shares, that can be exchanged for an underlying asset, such as common stock. Conversion value is calculated by multiplying the common stock price by the conversion ratio.

INVESTOPEDIA EXPLAINS 'Conversion Value'

A convertible security that is trading at a price above its conversion value is said to have a conversion premium. This makes the security valuable and desirable. A convertible security is considered "busted" when it is trading at a price far below its conversion value. If the price of the underlying security falls too far below the conversion value, the convertible security is said to have reached its floor.



RELATED TERMS
  1. Mandatory Convertible

    A type of convertible bond that has a required conversion or ...
  2. Convertible Preferred Stock

    Preferred stock that includes an option for the holder to convert ...
  3. Convertible Bond

    A bond that can be converted into a predetermined amount of the ...
  4. Convertibles

    Securities, usually bonds or preferred shares, that can be converted ...
  5. Common Stock

    A security that represents ownership in a corporation. Holders ...
  6. Conversion Price

    The price per share at which a convertible security, such as ...
Related Articles
  1. Bonds & Fixed Income

    A Primer On Preferred Stocks

    Offering both income and relative security, these uncommon shares may work for you.
  2. Bonds & Fixed Income

    Introduction To Convertible Preferred Shares

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

    An Introduction To Reverse Convertible Notes (RCNs)

    When stocks are stagnant and fixed-income yields are crumbling, RCNs come to the rescue!
  4. Bonds & Fixed Income

    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. Bonds & Fixed Income

    Convertible Bonds: An Introduction

    Find out about the nuts and bolts, pros and cons of investing in bonds.
  6. Options & Futures

    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.
  7. Options & Futures

    What is the difference between convertible and reverse convertible bonds?

    The difference between a regular convertible bond and a reverse convertible bond is the options attached to the bond. While a convertible bond gives the bondholder the right to convert the asset ...
  8. Fundamental Analysis

    What are the components of shareholders' equity?

    Understanding company valuation figures, such as shareholders' equity, can be a powerful tool in assessing the financial strength of a business.
  9. Trading Strategies

    What are the pros and cons of owning preferred stock instead of common stock?

    Understand and explore the advantages and disadvantages of owning preferred stock as opposed to owning common stock shares in a company.
  10. Fundamental Analysis

    What is the difference between market capitalization and enterprise value?

    Understand the basics of market capitalization and enterprise value, how they measure company value and how they differ in calculation and precision.

You May Also Like

Hot Definitions
  1. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  2. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  3. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  4. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  5. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  6. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
Trading Center