Convertible Arbitrage

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Dictionary Says

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 Says

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 Definitions

  •

    Arbitrage

    The simultaneous purchase and sale of an asset in order to profit from a difference in the price. It is a trade that profits by exploiting price differences of identical or similar ...
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  • Common Stock

    A security that represents ownership in a corporation. Holders of common stock exercise control by electing a board of directors and voting on corporate policy. Common stockholders are ...
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  • Conversion Price

    The price per share at which a convertible security, such as corporate bonds or preferred shares, can be converted into common stock.
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    • Convertibles

      Securities, usually bonds or preferred shares, that can be converted into common stock. Convertibles are most often associated with convertible bonds, which allow bond holders to convert ...
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    • Short (or Short Position)

      1. The sale of a borrowed security, commodity or currency with the expectation that the asset will fall in value.2. In the context of options, it is the sale (also known as "writing") of ...
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