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. Arbitrage

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

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

    Borrowing money at a low interest rate from a credit card then ...
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