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.



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. Conversion Price

    The price per share at which a convertible security, such as ...
  6. Common Stock

    A security that represents ownership in a corporation. Holders ...
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. Investing

    Where to Ride Out the Volatility

    The one word that characterizes financial markets today: volatile. Take a look at these three considerations.
  8. Term

    The Advantages of Preferred Dividends

    Preferred dividends are cash distributions a company pays on its preferred shares.
  9. Mutual Funds & ETFs

    Preferred Stock ETFs Vs Bond ETFs

    If you’re weighing an investment in a preferred stock exchange-traded fund versus a bond ETF, there are two factors you should consider most.
  10. Investing Basics

    Explaining Wedding Warrants

    A wedding warrant is a warrant that can only be exercised if the host asset, usually a bond or preferred stock, is surrendered.
RELATED FAQS
  1. 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 ... Read Full Answer >>
  2. What are ComputerShare's escheatment services?

    Escheatment is the process by which ownership of abandoned property is transferred to the state. Escheated property can include ... Read Full Answer >>
  3. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  4. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
  5. How many votes am I entitled to, if I own ordinary shares of a company?

    If an investor owns one ordinary share of a company, that investor is entitled to one vote on all of that company's major ... Read Full Answer >>
  6. What is the difference between the equity market and the stock market?

    The terms "equity market" and "stock market" are synonymous, both referring to the equity interests in publicly held companies, ... Read Full Answer >>
Hot Definitions
  1. Harry Potter Stock Index

    A collection of stocks from companies related to the "Harry Potter" series franchise. Created by StockPickr, this index seeks ...
  2. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  3. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  4. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  5. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
Trading Center