Forced Conversion

DEFINITION of 'Forced Conversion'

The occurrence of an issuer of a convertible security exercising the right to call the issue, forcing investors to convert their securities into the predetermined number of shares.

BREAKING DOWN 'Forced Conversion'

An issuer will be interested in forcing a conversion if interest rates decline significantly, or if the price of the security underlying the convertible is above the conversion price. Forced conversions are generally detrimental to the holders of the security.

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RELATED FAQS
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    Learn about busted convertible bonds; these are hybrid securities with conversion prices significantly higher than the market ... Read Answer >>
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    Convertible bonds usually have no voting rights until they are converted. Even after conversion, they may not be granted ... Read Answer >>
  3. What is a Chinese hedge?

    A Chinese Hedge is a form of arbitrage by which an investor shorts a convertible bond and buys the underlying common stock. ... Read Answer >>
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    A currency converter is a calculator that converts the value or quantity of one currency into the relative values or quantities ... Read Answer >>
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