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. Diluted Earnings Per Share - Diluted ...

    A performance metric used to gauge the quality of a company's ...
  3. Fully Diluted Shares

    The total number of shares that would be outstanding if all possible ...
  4. Common Stock

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

    The price per share at which a convertible security, such as ...
  6. Convertible Bond

    A bond that can be converted into a predetermined amount of the ...
Related Articles
  1. A Primer On Preferred Stocks
    Bonds & Fixed Income

    A Primer On Preferred Stocks

  2. Introduction To Convertible Preferred ...
    Bonds & Fixed Income

    Introduction To Convertible Preferred ...

  3. An Introduction To Reverse Convertible ...
    Options & Futures

    An Introduction To Reverse Convertible ...

  4. Convertible Bonds: Pros And Cons For ...
    Bonds & Fixed Income

    Convertible Bonds: Pros And Cons For ...

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center