Conversion premium

Definition:

The extent by which the conversion price of a convertible security exceeds the prevailing common stock price at the time the convertible security is issued. In general usage, the conversion premium is the amount by which the convertible security trades above its conversted value. For example, if a $1,000 par bond is trading at $1,100, it is convertible into 50 shares, and the shares are trading at $21, the converted value is 50 X 20.50 = $1,025, and the conversion premium is $75.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

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Central Counterparty Clearing House

An organization in European countries that helps facilitate trading done in European derivatives and equities market.

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