Convertible Arbitrage

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DEFINITION of 'Convertible Arbitrage'

An investing strategy that involves the long position on a convertible security and a short position in its converting common stock.

INVESTOPEDIA EXPLAINS 'Convertible Arbitrage'

This strategy attempts to exploit profits when there is a pricing error made in the conversion factor of the convertible security.

RELATED TERMS
  1. Common Stock

    A security that represents ownership in a corporation. Holders ...
  2. Arbitrage

    The simultaneous purchase and sale of an asset in order to profit ...
  3. Conversion Price

    The price per share at which a convertible security, such as ...
  4. Convertibles

    Securities, usually bonds or preferred shares, that can be converted ...
  5. Short (or Short Position)

    1. The sale of a borrowed security, commodity or currency with ...
  6. Surrender Period

    The amount of time an investor must wait until he or she can ...
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