Premium Put Convertible

Filed Under: ,
Dictionary Says

Definition of 'Premium Put Convertible'


A convertible bond with an additional put feature that allows it to be redeemed at a premium sometime during its life. As with a put option, the issuer of the premium put convertible bond has an obligation to buy back the bond upon the discretion of the bondholder. Thus, the put option attached to this convertible bond allows it to be redeemed at a premium by the bondholder anytime before maturity.

Investopedia Says

Investopedia explains 'Premium Put Convertible'


The price of a regular convertible bond is highly dependent on the price of the underlying stock; as the stock price rises, the price of the convertible increases and as the stock price falls, the price of the convertible decreases. This relationship between the premium put convertible and the underlying stock may hold when the stock is rising, but it may be less apparent when the stock is falling, since the put provision provides a degree of downside protection for the premium put convertible.


In exchange for the right to "put" the premium put convertible to the issuer, the bondholder may have to settle for lower coupon payments from the bond. A premium put convertible will, therefore, generally have a lower coupon rate than a regular convertible bond.



comments powered by Disqus
Hot Definitions
  1. Valuation

    The process of determining the current worth of an asset or company. There are many techniques that can be used to determine value, some are subjective and others are objective.
  2. Tech Street

    A term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.
  3. Tech Street

    A term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.
  4. Momentum Investing

    An investment strategy that aims to capitalize on the continuance of existing trends in the market. The momentum investor believes that large increases in the price of a security will be followed by additional gains and vice versa for declining values.
  5. Momentum Investing

    An investment strategy that aims to capitalize on the continuance of existing trends in the market. The momentum investor believes that large increases in the price of a security will be followed by additional gains and vice versa for declining values.
  6. IPO ETF

    An exchange-traded fund that focuses on stocks that have recently held an initial public offering (IPO). The underlying indexes tracked by IPO ETFs vary from one fund manager to another, but index IPO ETFs are usually passively managed and contain equities that have recently been offered to the public.
Trading Center