Conversion Value

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.

BREAKING DOWN '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.



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RELATED FAQS
  1. Where does the stock come from when convertible bonds are converted to stock?

    First, let's define convertible bonds. A unique combination of debt and equity, they provide investors with the chance to ... Read Answer >>
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