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. Short (or Short Position)

    1. The sale of a borrowed security, commodity or currency with ...
  2. Convertibles

    Securities, usually bonds or preferred shares, that can be converted ...
  3. Arbitrage

    The simultaneous purchase and sale of an asset in order to profit ...
  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. Bond

    A debt investment in which an investor loans money to an entity ...
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