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class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Vanilla_convertible_bonds"> <div class="vector-toc-text"> <span class="vector-toc-numb">1.1</span> <span>Vanilla convertible bonds</span> </div> </a> <ul id="toc-Vanilla_convertible_bonds-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Mandatory_convertibles" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Mandatory_convertibles"> <div class="vector-toc-text"> <span class="vector-toc-numb">1.2</span> <span>Mandatory convertibles</span> </div> </a> <ul id="toc-Mandatory_convertibles-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Reverse_convertibles" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Reverse_convertibles"> <div class="vector-toc-text"> <span class="vector-toc-numb">1.3</span> <span>Reverse convertibles</span> </div> </a> <ul id="toc-Reverse_convertibles-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Packaged_convertibles" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Packaged_convertibles"> <div class="vector-toc-text"> <span class="vector-toc-numb">1.4</span> <span>Packaged convertibles</span> </div> </a> <ul id="toc-Packaged_convertibles-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Contingent_convertibles" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Contingent_convertibles"> <div class="vector-toc-text"> <span class="vector-toc-numb">1.5</span> <span>Contingent convertibles</span> </div> </a> <ul id="toc-Contingent_convertibles-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Foreign_currency_convertibles" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Foreign_currency_convertibles"> <div class="vector-toc-text"> <span class="vector-toc-numb">1.6</span> <span>Foreign currency convertibles</span> </div> </a> <ul id="toc-Foreign_currency_convertibles-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Exchangeable_bond" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Exchangeable_bond"> <div class="vector-toc-text"> <span class="vector-toc-numb">1.7</span> <span>Exchangeable bond</span> </div> </a> <ul id="toc-Exchangeable_bond-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Synthetic_bond" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Synthetic_bond"> <div class="vector-toc-text"> <span class="vector-toc-numb">1.8</span> <span>Synthetic bond</span> </div> </a> <ul id="toc-Synthetic_bond-sublist" class="vector-toc-list"> </ul> </li> </ul> </li> <li id="toc-Structure,_features_and_terminology" class="vector-toc-list-item vector-toc-level-1"> <a class="vector-toc-link" href="#Structure,_features_and_terminology"> <div class="vector-toc-text"> <span class="vector-toc-numb">2</span> <span>Structure, features and terminology</span> </div> </a> <ul id="toc-Structure,_features_and_terminology-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Markets_and_investor_profiles" class="vector-toc-list-item vector-toc-level-1"> <a class="vector-toc-link" href="#Markets_and_investor_profiles"> <div class="vector-toc-text"> <span class="vector-toc-numb">3</span> <span>Markets and investor profiles</span> </div> </a> <ul id="toc-Markets_and_investor_profiles-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Valuation" class="vector-toc-list-item vector-toc-level-1"> <a class="vector-toc-link" href="#Valuation"> <div class="vector-toc-text"> <span class="vector-toc-numb">4</span> <span>Valuation</span> </div> </a> <ul id="toc-Valuation-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Risk" class="vector-toc-list-item vector-toc-level-1"> <a class="vector-toc-link" href="#Risk"> <div class="vector-toc-text"> <span class="vector-toc-numb">5</span> <span>Risk</span> </div> </a> <ul id="toc-Risk-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Uses_for_investors" class="vector-toc-list-item vector-toc-level-1"> <a class="vector-toc-link" href="#Uses_for_investors"> <div class="vector-toc-text"> <span class="vector-toc-numb">6</span> <span>Uses for investors</span> </div> </a> <ul id="toc-Uses_for_investors-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Uses_for_issuers" class="vector-toc-list-item vector-toc-level-1"> <a class="vector-toc-link" href="#Uses_for_issuers"> <div class="vector-toc-text"> <span class="vector-toc-numb">7</span> <span>Uses for issuers</span> </div> </a> <button aria-controls="toc-Uses_for_issuers-sublist" class="cdx-button cdx-button--weight-quiet cdx-button--icon-only vector-toc-toggle"> <span class="vector-icon mw-ui-icon-wikimedia-expand"></span> <span>Toggle Uses for issuers subsection</span> </button> <ul id="toc-Uses_for_issuers-sublist" class="vector-toc-list"> <li id="toc-Lower_fixed-rate_borrowing_costs" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Lower_fixed-rate_borrowing_costs"> <div class="vector-toc-text"> <span class="vector-toc-numb">7.1</span> <span>Lower fixed-rate borrowing costs</span> </div> </a> <ul id="toc-Lower_fixed-rate_borrowing_costs-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Locking_into_low_fixed–rate_long-term_borrowing" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Locking_into_low_fixed–rate_long-term_borrowing"> <div class="vector-toc-text"> <span class="vector-toc-numb">7.2</span> <span>Locking into low fixed–rate long-term borrowing</span> </div> </a> <ul id="toc-Locking_into_low_fixed–rate_long-term_borrowing-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Higher_conversion_price_than_a_rights_issue_strike_price" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Higher_conversion_price_than_a_rights_issue_strike_price"> <div class="vector-toc-text"> <span class="vector-toc-numb">7.3</span> <span>Higher conversion price than a rights issue strike price</span> </div> </a> <ul id="toc-Higher_conversion_price_than_a_rights_issue_strike_price-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Voting_dilution_deferred" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Voting_dilution_deferred"> <div class="vector-toc-text"> <span class="vector-toc-numb">7.4</span> <span>Voting dilution deferred</span> </div> </a> <ul id="toc-Voting_dilution_deferred-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Increasing_the_total_level_of_debt_gearing" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Increasing_the_total_level_of_debt_gearing"> <div class="vector-toc-text"> <span class="vector-toc-numb">7.5</span> <span>Increasing the total level of debt gearing</span> </div> </a> <ul id="toc-Increasing_the_total_level_of_debt_gearing-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Maximising_funding_permitted_under_pre-emption_rules" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Maximising_funding_permitted_under_pre-emption_rules"> <div class="vector-toc-text"> <span class="vector-toc-numb">7.6</span> <span>Maximising funding permitted under pre-emption rules</span> </div> </a> <ul id="toc-Maximising_funding_permitted_under_pre-emption_rules-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Premium_redemption_convertibles" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Premium_redemption_convertibles"> <div class="vector-toc-text"> <span class="vector-toc-numb">7.7</span> <span>Premium redemption convertibles</span> </div> </a> <ul id="toc-Premium_redemption_convertibles-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Takeover_paper" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Takeover_paper"> <div class="vector-toc-text"> <span class="vector-toc-numb">7.8</span> <span>Takeover paper</span> </div> </a> <ul id="toc-Takeover_paper-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Tax_advantages" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Tax_advantages"> <div class="vector-toc-text"> <span class="vector-toc-numb">7.9</span> <span>Tax advantages</span> </div> </a> <ul id="toc-Tax_advantages-sublist" class="vector-toc-list"> </ul> </li> </ul> </li> <li id="toc-2010_U.S._equity-linked_underwriting_league_table" class="vector-toc-list-item vector-toc-level-1"> <a class="vector-toc-link" href="#2010_U.S._equity-linked_underwriting_league_table"> <div class="vector-toc-text"> <span class="vector-toc-numb">8</span> <span>2010 U.S. equity-linked underwriting league table</span> </div> </a> <ul id="toc-2010_U.S._equity-linked_underwriting_league_table-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-See_also" class="vector-toc-list-item vector-toc-level-1"> <a class="vector-toc-link" href="#See_also"> <div class="vector-toc-text"> <span class="vector-toc-numb">9</span> <span>See also</span> </div> </a> <ul id="toc-See_also-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-References" class="vector-toc-list-item vector-toc-level-1"> <a class="vector-toc-link" href="#References"> <div class="vector-toc-text"> <span class="vector-toc-numb">10</span> <span>References</span> </div> </a> <ul id="toc-References-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Further_reading" class="vector-toc-list-item vector-toc-level-1"> <a class="vector-toc-link" href="#Further_reading"> <div class="vector-toc-text"> <span class="vector-toc-numb">11</span> <span>Further reading</span> </div> </a> <ul id="toc-Further_reading-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-External_links" class="vector-toc-list-item vector-toc-level-1"> <a class="vector-toc-link" href="#External_links"> <div class="vector-toc-text"> <span class="vector-toc-numb">12</span> <span>External links</span> </div> </a> <ul id="toc-External_links-sublist" class="vector-toc-list"> </ul> </li> </ul> </div> </div> </nav> </div> </div> <div class="mw-content-container"> <main id="content" class="mw-body"> <header class="mw-body-header vector-page-titlebar"> <nav aria-label="Contents" class="vector-toc-landmark"> <div id="vector-page-titlebar-toc" class="vector-dropdown vector-page-titlebar-toc vector-button-flush-left" > <input type="checkbox" id="vector-page-titlebar-toc-checkbox" role="button" aria-haspopup="true" data-event-name="ui.dropdown-vector-page-titlebar-toc" class="vector-dropdown-checkbox " aria-label="Toggle the table of contents" > <label id="vector-page-titlebar-toc-label" for="vector-page-titlebar-toc-checkbox" class="vector-dropdown-label cdx-button cdx-button--fake-button cdx-button--fake-button--enabled cdx-button--weight-quiet cdx-button--icon-only " aria-hidden="true" ><span class="vector-icon mw-ui-icon-listBullet mw-ui-icon-wikimedia-listBullet"></span> <span class="vector-dropdown-label-text">Toggle the table of contents</span> </label> <div class="vector-dropdown-content"> <div id="vector-page-titlebar-toc-unpinned-container" class="vector-unpinned-container"> </div> </div> </div> </nav> <h1 id="firstHeading" class="firstHeading mw-first-heading"><span class="mw-page-title-main">Convertible bond</span></h1> <div id="p-lang-btn" class="vector-dropdown mw-portlet mw-portlet-lang" > <input type="checkbox" id="p-lang-btn-checkbox" role="button" aria-haspopup="true" data-event-name="ui.dropdown-p-lang-btn" class="vector-dropdown-checkbox mw-interlanguage-selector" aria-label="Go to an article in another language. Available in 20 languages" > <label id="p-lang-btn-label" for="p-lang-btn-checkbox" class="vector-dropdown-label cdx-button cdx-button--fake-button cdx-button--fake-button--enabled cdx-button--weight-quiet cdx-button--action-progressive mw-portlet-lang-heading-20" aria-hidden="true" ><span class="vector-icon mw-ui-icon-language-progressive mw-ui-icon-wikimedia-language-progressive"></span> <span class="vector-dropdown-label-text">20 languages</span> </label> <div class="vector-dropdown-content"> <div class="vector-menu-content"> <ul class="vector-menu-content-list"> <li class="interlanguage-link interwiki-ar mw-list-item"><a href="https://ar.wikipedia.org/wiki/%D8%B3%D9%86%D8%AF_%D9%82%D8%A7%D8%A8%D9%84_%D9%84%D9%84%D8%AA%D8%AD%D9%88%D9%8A%D9%84" title="سند قابل للتحويل – Arabic" lang="ar" hreflang="ar" data-title="سند قابل للتحويل" data-language-autonym="العربية" data-language-local-name="Arabic" class="interlanguage-link-target"><span>العربية</span></a></li><li class="interlanguage-link interwiki-ca mw-list-item"><a href="https://ca.wikipedia.org/wiki/Bo_convertible" title="Bo convertible – Catalan" lang="ca" hreflang="ca" data-title="Bo convertible" data-language-autonym="Català" data-language-local-name="Catalan" class="interlanguage-link-target"><span>Català</span></a></li><li class="interlanguage-link interwiki-cs mw-list-item"><a href="https://cs.wikipedia.org/wiki/Konvertibiln%C3%AD_dluhopis" title="Konvertibilní dluhopis – Czech" lang="cs" hreflang="cs" data-title="Konvertibilní dluhopis" data-language-autonym="Čeština" data-language-local-name="Czech" class="interlanguage-link-target"><span>Čeština</span></a></li><li class="interlanguage-link interwiki-de mw-list-item"><a href="https://de.wikipedia.org/wiki/Wandelanleihe" title="Wandelanleihe – German" lang="de" hreflang="de" data-title="Wandelanleihe" data-language-autonym="Deutsch" data-language-local-name="German" class="interlanguage-link-target"><span>Deutsch</span></a></li><li class="interlanguage-link interwiki-es mw-list-item"><a href="https://es.wikipedia.org/wiki/Obligaci%C3%B3n_convertible" title="Obligación convertible – Spanish" lang="es" hreflang="es" data-title="Obligación convertible" data-language-autonym="Español" data-language-local-name="Spanish" class="interlanguage-link-target"><span>Español</span></a></li><li class="interlanguage-link interwiki-fr mw-list-item"><a href="https://fr.wikipedia.org/wiki/Obligation_convertible" title="Obligation convertible – French" lang="fr" hreflang="fr" data-title="Obligation convertible" data-language-autonym="Français" data-language-local-name="French" class="interlanguage-link-target"><span>Français</span></a></li><li class="interlanguage-link interwiki-ko mw-list-item"><a href="https://ko.wikipedia.org/wiki/%EC%A0%84%ED%99%98%EC%82%AC%EC%B1%84" title="전환사채 – Korean" lang="ko" hreflang="ko" data-title="전환사채" data-language-autonym="한국어" data-language-local-name="Korean" class="interlanguage-link-target"><span>한국어</span></a></li><li class="interlanguage-link interwiki-hy mw-list-item"><a href="https://hy.wikipedia.org/wiki/%D5%93%D5%B8%D5%AD%D5%A1%D6%80%D5%AF%D5%A5%D5%AC%D5%AB_%D5%BA%D5%A1%D6%80%D5%BF%D5%A1%D5%BF%D5%B8%D5%B4%D5%BD" title="Փոխարկելի պարտատոմս – Armenian" lang="hy" hreflang="hy" data-title="Փոխարկելի պարտատոմս" data-language-autonym="Հայերեն" data-language-local-name="Armenian" class="interlanguage-link-target"><span>Հայերեն</span></a></li><li class="interlanguage-link interwiki-id mw-list-item"><a href="https://id.wikipedia.org/wiki/Obligasi_konversi" title="Obligasi konversi – Indonesian" lang="id" hreflang="id" data-title="Obligasi konversi" data-language-autonym="Bahasa Indonesia" data-language-local-name="Indonesian" class="interlanguage-link-target"><span>Bahasa Indonesia</span></a></li><li class="interlanguage-link interwiki-it mw-list-item"><a href="https://it.wikipedia.org/wiki/Obbligazione_convertibile" title="Obbligazione convertibile – Italian" lang="it" hreflang="it" data-title="Obbligazione convertibile" data-language-autonym="Italiano" data-language-local-name="Italian" class="interlanguage-link-target"><span>Italiano</span></a></li><li class="interlanguage-link interwiki-he mw-list-item"><a href="https://he.wikipedia.org/wiki/%D7%90%D7%92%22%D7%97_%D7%9C%D7%94%D7%9E%D7%A8%D7%94" title="אג"ח להמרה – Hebrew" lang="he" hreflang="he" data-title="אג"ח להמרה" data-language-autonym="עברית" data-language-local-name="Hebrew" class="interlanguage-link-target"><span>עברית</span></a></li><li class="interlanguage-link interwiki-nl mw-list-item"><a href="https://nl.wikipedia.org/wiki/Converteerbare_obligatie" title="Converteerbare obligatie – Dutch" lang="nl" hreflang="nl" data-title="Converteerbare obligatie" data-language-autonym="Nederlands" data-language-local-name="Dutch" class="interlanguage-link-target"><span>Nederlands</span></a></li><li class="interlanguage-link interwiki-ja mw-list-item"><a href="https://ja.wikipedia.org/wiki/%E8%BB%A2%E6%8F%9B%E7%A4%BE%E5%82%B5%E5%9E%8B%E6%96%B0%E6%A0%AA%E4%BA%88%E7%B4%84%E6%A8%A9%E4%BB%98%E7%A4%BE%E5%82%B5" title="転換社債型新株予約権付社債 – Japanese" lang="ja" hreflang="ja" data-title="転換社債型新株予約権付社債" data-language-autonym="日本語" data-language-local-name="Japanese" class="interlanguage-link-target"><span>日本語</span></a></li><li class="interlanguage-link interwiki-pl mw-list-item"><a href="https://pl.wikipedia.org/wiki/Obligacja_zamienna" title="Obligacja zamienna – Polish" lang="pl" hreflang="pl" data-title="Obligacja zamienna" data-language-autonym="Polski" data-language-local-name="Polish" class="interlanguage-link-target"><span>Polski</span></a></li><li class="interlanguage-link interwiki-pt mw-list-item"><a href="https://pt.wikipedia.org/wiki/Nota_convers%C3%ADvel" title="Nota conversível – Portuguese" lang="pt" hreflang="pt" data-title="Nota conversível" data-language-autonym="Português" data-language-local-name="Portuguese" class="interlanguage-link-target"><span>Português</span></a></li><li class="interlanguage-link interwiki-ru mw-list-item"><a href="https://ru.wikipedia.org/wiki/%D0%9A%D0%BE%D0%BD%D0%B2%D0%B5%D1%80%D1%82%D0%B8%D1%80%D1%83%D0%B5%D0%BC%D0%B0%D1%8F_%D0%BE%D0%B1%D0%BB%D0%B8%D0%B3%D0%B0%D1%86%D0%B8%D1%8F" title="Конвертируемая облигация – Russian" lang="ru" hreflang="ru" data-title="Конвертируемая облигация" data-language-autonym="Русский" data-language-local-name="Russian" class="interlanguage-link-target"><span>Русский</span></a></li><li class="interlanguage-link interwiki-fi mw-list-item"><a href="https://fi.wikipedia.org/wiki/Vaihtovelkakirjalaina" title="Vaihtovelkakirjalaina – Finnish" lang="fi" hreflang="fi" data-title="Vaihtovelkakirjalaina" data-language-autonym="Suomi" data-language-local-name="Finnish" class="interlanguage-link-target"><span>Suomi</span></a></li><li class="interlanguage-link interwiki-sv mw-list-item"><a href="https://sv.wikipedia.org/wiki/Konvertibel" title="Konvertibel – Swedish" lang="sv" hreflang="sv" data-title="Konvertibel" data-language-autonym="Svenska" data-language-local-name="Swedish" class="interlanguage-link-target"><span>Svenska</span></a></li><li class="interlanguage-link interwiki-vi mw-list-item"><a href="https://vi.wikipedia.org/wiki/Tr%C3%A1i_phi%E1%BA%BFu_chuy%E1%BB%83n_%C4%91%E1%BB%95i" title="Trái phiếu chuyển đổi – Vietnamese" lang="vi" hreflang="vi" data-title="Trái phiếu chuyển đổi" data-language-autonym="Tiếng Việt" data-language-local-name="Vietnamese" class="interlanguage-link-target"><span>Tiếng Việt</span></a></li><li class="interlanguage-link interwiki-zh mw-list-item"><a href="https://zh.wikipedia.org/wiki/%E5%8F%AF%E8%BD%AC%E6%8D%A2%E5%80%BA%E5%88%B8" title="可转换债券 – Chinese" lang="zh" hreflang="zh" data-title="可转换债券" data-language-autonym="中文" data-language-local-name="Chinese" class="interlanguage-link-target"><span>中文</span></a></li> </ul> <div class="after-portlet after-portlet-lang"><span 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market">Bond market</a></th></tr><tr><td class="sidebar-content hlist" style="padding:0.15em 0.5em 0.7em;"> <ul><li><a href="/wiki/Bond_valuation" title="Bond valuation">Bond valuation</a></li> <li><a href="/wiki/Corporate_bond" title="Corporate bond">Corporate bond</a></li> <li><a href="/wiki/Fixed_income" title="Fixed income">Fixed income</a></li> <li><a href="/wiki/Government_bond" title="Government bond">Government bond</a></li> <li><a href="/wiki/High-yield_debt" title="High-yield debt">High-yield debt</a></li> <li><a href="/wiki/Municipal_bond" title="Municipal bond">Municipal bond</a></li> <li><br /><a href="/wiki/Securitization" title="Securitization">Securitization</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="background:#ddddff;"> <a href="/wiki/Stock_market" title="Stock market">Stock market</a></th></tr><tr><td class="sidebar-content hlist" style="padding:0.15em 0.5em 0.7em;"> <ul><li><a href="/wiki/Common_stock" title="Common stock">Common stock</a></li> <li><a href="/wiki/Growth_stock" title="Growth stock">Growth stock</a></li> <li><a href="/wiki/Preferred_stock" title="Preferred stock">Preferred stock</a></li> <li><a href="/wiki/Registered_share" title="Registered share">Registered share</a></li> <li><a href="/wiki/Shareholder" title="Shareholder">Shareholder</a></li> <li><a href="/wiki/Stock" title="Stock">Stock</a></li> <li><a href="/wiki/Stockbroker" title="Stockbroker">Stockbroker</a></li> <li><a href="/wiki/Stock_certificate" title="Stock certificate">Stock certificate</a></li> <li><a href="/wiki/Stock_exchange" title="Stock exchange">Stock exchange</a></li> <li><a href="/wiki/Watered_stock" title="Watered stock">Watered stock</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="background:#ddddff;"> Other markets</th></tr><tr><td class="sidebar-content hlist" style="padding:0.15em 0.5em 0.7em;"> <div style="display:inline-block; padding:0.2em 0.4em; line-height:1.2em; line-height:1.25em;"><a href="/wiki/Derivatives_market" title="Derivatives market">Derivatives</a> <div class="hlist"><ul><li>(<a href="/wiki/Credit_derivative" title="Credit derivative">Credit derivative</a></li><li><a href="/wiki/Futures_exchange" title="Futures exchange">Futures exchange</a></li><li><a href="/wiki/Hybrid_security" title="Hybrid security">Hybrid security</a>)</li></ul></div> </div> <div style="display:inline-block; padding:0.2em 0.4em; line-height:1.2em; line-height:1.25em;padding-bottom:0.25em;"><a href="/wiki/Foreign_exchange_market" title="Foreign exchange market">Foreign exchange</a> <div class="hlist"><ul><li>(<a href="/wiki/Currency" title="Currency">Currency</a></li><li><a href="/wiki/Exchange_rate" title="Exchange rate">Exchange rate</a>)</li></ul></div> </div> <ul><li><a href="/wiki/Commodity_market" title="Commodity market">Commodity</a></li> <li><a href="/wiki/Exchange-traded_fund" title="Exchange-traded fund">ETF</a></li> <li><a href="/wiki/Money_market" title="Money market">Money</a></li> <li><a href="/wiki/Mutual_fund" title="Mutual fund">Mutual fund</a></li> <li><a href="/wiki/Option_(finance)" title="Option (finance)">Option</a></li> <li><a href="/wiki/Real_estate" title="Real estate">Real estate</a></li> <li><a href="/wiki/Reinsurance" title="Reinsurance">Reinsurance</a></li> <li><a href="/wiki/Structured_product" title="Structured product">Structured product</a></li> <li><a href="/wiki/Swap_(finance)" title="Swap (finance)">Swap (finance)</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="background:#ddddff;"> <a href="/wiki/Over-the-counter_(finance)" title="Over-the-counter (finance)">Over-the-counter (off-exchange)</a></th></tr><tr><td class="sidebar-content hlist" style="padding:0.15em 0.5em 0.7em;"> <div class="hlist"><ul><li><a href="/wiki/Forward_contract" title="Forward contract">Forwards</a></li><li><a href="/wiki/Option_(finance)" title="Option (finance)">Options</a></li></ul></div> <div class="hlist"><ul><li><a 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class="mbox-text"><div class="mbox-text-span">This article <b>needs additional citations for <a href="/wiki/Wikipedia:Verifiability" title="Wikipedia:Verifiability">verification</a></b>.<span class="hide-when-compact"> Please help <a href="/wiki/Special:EditPage/Convertible_bond" title="Special:EditPage/Convertible bond">improve this article</a> by <a href="/wiki/Help:Referencing_for_beginners" title="Help:Referencing for beginners">adding citations to reliable sources</a>. Unsourced material may be challenged and removed.<br /><small><span class="plainlinks"><i>Find sources:</i> <a rel="nofollow" class="external text" href="https://www.google.com/search?as_eq=wikipedia&q=%22Convertible+bond%22">"Convertible bond"</a> – <a rel="nofollow" class="external text" href="https://www.google.com/search?tbm=nws&q=%22Convertible+bond%22+-wikipedia&tbs=ar:1">news</a> <b>·</b> <a rel="nofollow" class="external text" href="https://www.google.com/search?&q=%22Convertible+bond%22&tbs=bkt:s&tbm=bks">newspapers</a> <b>·</b> <a rel="nofollow" class="external text" href="https://www.google.com/search?tbs=bks:1&q=%22Convertible+bond%22+-wikipedia">books</a> <b>·</b> <a rel="nofollow" class="external text" href="https://scholar.google.com/scholar?q=%22Convertible+bond%22">scholar</a> <b>·</b> <a rel="nofollow" class="external text" href="https://www.jstor.org/action/doBasicSearch?Query=%22Convertible+bond%22&acc=on&wc=on">JSTOR</a></span></small></span> <span class="date-container"><i>(<span class="date">August 2018</span>)</i></span><span class="hide-when-compact"><i> (<small><a href="/wiki/Help:Maintenance_template_removal" title="Help:Maintenance template removal">Learn how and when to remove this message</a></small>)</i></span></div></td></tr></tbody></table> <p>In <a href="/wiki/Finance" title="Finance">finance</a>, a <b>convertible bond</b>, <b>convertible note</b>, or <b>convertible debt</b> (or a <b>convertible debenture</b> if it has a maturity of greater than 10 years) is a type of <a href="/wiki/Bond_(finance)" title="Bond (finance)">bond</a> that the holder can convert into a specified number of shares of <a href="/wiki/Common_stock" title="Common stock">common stock</a> in the issuing <a href="/wiki/Types_of_companies" class="mw-redirect" title="Types of companies">company</a> or cash of equal value. It is a <a href="/wiki/Hybrid_security" title="Hybrid security">hybrid security</a> with debt- and equity-like features.<sup id="cite_ref-1" class="reference"><a href="#cite_note-1"><span class="cite-bracket">[</span>1<span class="cite-bracket">]</span></a></sup> It originated in the mid-19th century, and was used by early <a href="/wiki/Speculation" title="Speculation">speculators</a> such as <a href="/wiki/Jacob_Little" title="Jacob Little">Jacob Little</a> and <a href="/wiki/Daniel_Drew" title="Daniel Drew">Daniel Drew</a> to counter <a href="/wiki/Cornering_the_market" title="Cornering the market">market cornering</a>.<sup id="cite_ref-2" class="reference"><a href="#cite_note-2"><span class="cite-bracket">[</span>2<span class="cite-bracket">]</span></a></sup> </p><p>Convertible bonds are most often issued by companies with a low credit rating and high growth potential. Convertible bonds are also considered <a href="/wiki/Security_(finance)#Debt" title="Security (finance)">debt security</a> because the companies agree to give fixed or floating interest rate as they do in common bonds for the funds of investor. To compensate for having additional value through the option to convert the bond to stock, a convertible bond typically has a <a href="/wiki/Coupon_(bond)" class="mw-redirect" title="Coupon (bond)">coupon</a> rate lower than that of similar, non-convertible debt. The investor receives the potential upside of conversion into equity while protecting downside with cash flow from the coupon payments and the return of principal upon maturity. These properties—and the fact that convertible bonds trade often below fair value<sup id="cite_ref-3" class="reference"><a href="#cite_note-3"><span class="cite-bracket">[</span>3<span class="cite-bracket">]</span></a></sup>—lead naturally to the idea of <a href="/wiki/Convertible_arbitrage" title="Convertible arbitrage">convertible arbitrage</a>, where a long position in the convertible bond is balanced by a short position in the underlying equity. </p><p>From the issuer's perspective, the key benefit of raising money by selling convertible bonds is a reduced cash <a href="/wiki/Interest" title="Interest">interest</a> payment. The advantage for companies of issuing convertible bonds is that, if the bonds are converted to stocks, companies' debt vanishes. However, in exchange for the benefit of reduced <a href="/wiki/Interest" title="Interest">interest</a> payments, the value of shareholder's equity is reduced due to the <a href="/wiki/Stock_dilution" title="Stock dilution">stock dilution</a> expected when bondholders convert their <a href="/wiki/Bond_(finance)" title="Bond (finance)">bonds</a> into new <a href="/wiki/Shares" class="mw-redirect" title="Shares">shares</a>. </p><p>Convertible notes are also a frequent vehicle for <a href="/wiki/Seed_money" title="Seed money">seed investing</a> in <a href="/wiki/Startup_company" title="Startup company">startup companies</a>, as a form of debt that converts to equity in a future investing round.<sup id="cite_ref-4" class="reference"><a href="#cite_note-4"><span class="cite-bracket">[</span>4<span class="cite-bracket">]</span></a></sup> It is a hybrid investment vehicle, which carries the (limited) protection of debt at the start, but shares in the upside as equity if the startup is successful, while avoiding the necessity of valuing the company at too early a stage. </p> <meta property="mw:PageProp/toc" /> <div class="mw-heading mw-heading2"><h2 id="Types">Types</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Convertible_bond&action=edit&section=1" title="Edit section: Types"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>Although no formal classification exists in the financial market it is possible to segment convertibles into the following sub-types: </p> <div class="mw-heading mw-heading3"><h3 id="Vanilla_convertible_bonds">Vanilla convertible bonds</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Convertible_bond&action=edit&section=2" title="Edit section: Vanilla convertible bonds"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>Vanilla convertible bonds are the most plain convertible structures. They grant the holder the right to convert into a certain number of shares determined according to a conversion price determined in advance. They may offer coupon regular payments during the life of the security and have a fixed maturity date where the nominal value of the bond is redeemable by the holder. This type is the most common convertible type and is typically providing the asymmetric returns profile and positive convexity often wrongly associated to the entire asset class: at maturity the holder would indeed either convert into shares or request the redemption at par depending on whether or not the stock price is above the conversion price. </p> <div class="mw-heading mw-heading3"><h3 id="Mandatory_convertibles">Mandatory convertibles</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Convertible_bond&action=edit&section=3" title="Edit section: Mandatory convertibles"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>Mandatory convertibles are a common variation of the vanilla subtype, especially on the US market. Mandatory convertible would force the holder to convert into shares at maturity—hence the term "Mandatory". Those securities would very often bear two conversion prices, making their profiles similar to a "<a href="/wiki/Risk_reversal" title="Risk reversal">risk reversal</a>" option strategy. The first conversion price would limit the price where the investor would receive the equivalent of its par value back in shares, the second would delimit where the investor will earn more than par. If the stock price is below the first conversion price the investor would suffer a capital loss compared to its original investment (excluding the potential coupon payments). Mandatory convertibles can be compared to forward selling of equity at a premium. </p> <div class="mw-heading mw-heading3"><h3 id="Reverse_convertibles">Reverse convertibles</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Convertible_bond&action=edit&section=4" title="Edit section: Reverse convertibles"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>Reverse convertibles are a less common variation, mostly issued synthetically. They would be opposite of the vanilla structure: the conversion price would act as a knock-in short put option: as the stock price drops below the conversion price the investor would start to be exposed the underlying stock performance and no longer able to redeem at par its bond. This negative convexity would be compensated by a usually high regular coupon payment. </p> <div class="mw-heading mw-heading3"><h3 id="Packaged_convertibles">Packaged convertibles</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Convertible_bond&action=edit&section=5" title="Edit section: Packaged convertibles"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>Packaged convertibles or sometimes "bond + option" structures are simply a straight bond and a call option/warrant wrapped together. Usually the investor would be able to then trade both legs separately. Although the initial payoff is similar to a plain vanilla one, the Packaged Convertibles would then have different dynamics and risks associated with them since at maturity the holder would not receive some cash or shares but some cash and potentially some share. They would for instance miss the modified duration mitigation effect usual with plain vanilla convertibles structures. </p> <div class="mw-heading mw-heading3"><h3 id="Contingent_convertibles">Contingent convertibles</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Convertible_bond&action=edit&section=6" title="Edit section: Contingent convertibles"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <style data-mw-deduplicate="TemplateStyles:r1236090951">.mw-parser-output .hatnote{font-style:italic}.mw-parser-output div.hatnote{padding-left:1.6em;margin-bottom:0.5em}.mw-parser-output .hatnote i{font-style:normal}.mw-parser-output .hatnote+link+.hatnote{margin-top:-0.5em}@media print{body.ns-0 .mw-parser-output .hatnote{display:none!important}}</style><div role="note" class="hatnote navigation-not-searchable">Main article: <a href="/wiki/Contingent_convertible_bond" title="Contingent convertible bond">Contingent convertible bond</a></div> <p>Contingent convertibles are a variation of the mandatory convertibles. They are automatically converted into equity if a pre-specified trigger event occurs, for example if the value of assets is below the value of its guaranteed debt. </p> <div class="mw-heading mw-heading3"><h3 id="Foreign_currency_convertibles">Foreign currency convertibles</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Convertible_bond&action=edit&section=7" title="Edit section: Foreign currency convertibles"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1236090951"><div role="note" class="hatnote navigation-not-searchable">Main article: <a href="/wiki/Foreign_currency_convertible_bonds" title="Foreign currency convertible bonds">Foreign currency convertible bonds</a></div> <p>Foreign currency convertibles are any convertible bonds whose face value is issued in a currency different from issuing company's domestic currency. </p> <div class="mw-heading mw-heading3"><h3 id="Exchangeable_bond">Exchangeable bond</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Convertible_bond&action=edit&section=8" title="Edit section: Exchangeable bond"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>Exchangeable bond where the issuing company and the underlying stock company are different companies (e.g. XS0882243453, GBL into GDF Suez). This distinction is usually made in terms of risk i.e. equity and credit risk being correlated: in some cases the entities would be legally distinct, but not considered as exchangeable as the ultimate guarantor being the same as the underlying stock company (e.g. typical in the case of the Sukuk, Islamic convertible bonds, needing a specific legal setup to be compliant with the Islamic law). </p> <div class="mw-heading mw-heading3"><h3 id="Synthetic_bond">Synthetic bond</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Convertible_bond&action=edit&section=9" title="Edit section: Synthetic bond"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p><a href="/wiki/Synthetic_bond" title="Synthetic bond">Synthetically structured</a> convertible bond issued by an investment bank to replicate a convertible payoff on a specific underlying equity. Sometimes referred also as Cash settled Bank Exchangeable Bonds (e.g. Barclays/MSFT 25 US06738G8A15 - Barclays Bank PLC is the issuer while Microsoft is the referenced underlying equity). Most reverse convertibles are synthetics. Synthetics are more similar to structured products with settlement done in cash and no equities being produced as the result of a conversion. The Packaged Convertibles (e.g. Siemens 17 DE000A1G0WA1) are sometimes confused with synthetics due to the fact an issuer (sometime a portfolio manager) will create a structure using straight bonds and options. There are in reality two completely different products with different risks and payoffs. </p> <div class="mw-heading mw-heading2"><h2 id="Structure,_features_and_terminology"><span id="Structure.2C_features_and_terminology"></span>Structure, features and terminology</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Convertible_bond&action=edit&section=10" title="Edit section: Structure, features and terminology"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <ul><li>Coupon: Periodic interest payment paid to the convertible bond holder from the issuer. Could be fixed or variable or equal to zero.</li> <li>Maturity/redemption date: The date on which the principal (par value) of the bond (and all remaining interest) are due to be paid. In some cases, for non-vanilla convertible bonds, there is no maturity date (i.e. perpetual), this is often the case with preferred convertibles (e.g. US0605056821).</li> <li>Final conversion date: Final date at which the holder can request the conversion into shares. Might be different from the redemption date.</li> <li>Yield: Yield of the convertible bond at the issuance date, could be different from the coupon value if the bond is offering a premium redemption. In those cases the yield value would determine the premium redemption value and intermediary put redemption value.</li> <li>Bond floor: Also known as straight bond value, this is the value of a convertible bond's fixed income elements (regular interest payments, payment of principal at maturity and a superior claim on assets compared to common stock) excluding the ability to convert into equities.<sup id="cite_ref-5" class="reference"><a href="#cite_note-5"><span class="cite-bracket">[</span>5<span class="cite-bracket">]</span></a></sup></li> <li>The issuance prospectus will state either a conversion ratio or a conversion price. The conversion ratio is the number of shares the investor receives when exchanging the bond for common stock. The conversion price is the price paid per share to acquire the shares when exchanging the bond for common stock.<sup id="cite_ref-6" class="reference"><a href="#cite_note-6"><span class="cite-bracket">[</span>6<span class="cite-bracket">]</span></a></sup></li> <li>Market conversion price: The price that the convertible investor effectively pays for the right to convert to common stock. It is calculated as shown below. Once the actual market price of the underlying stock exceeds the market conversion price embedded in the convertible, any further rise in the stock price will drive up the convertible security's price by at least the same percentage. Thus, the market conversion price can be thought of as a "break-even point."<sup id="cite_ref-7" class="reference"><a href="#cite_note-7"><span class="cite-bracket">[</span>7<span class="cite-bracket">]</span></a></sup></li></ul> <dl><dd><dl><dd><dl><dd><dl><dd><table class="wikitable"> <tbody><tr> <td>Market conversion price = market price of convertible bond / conversion ratio </td></tr></tbody></table></dd></dl></dd></dl></dd></dl></dd></dl> <ul><li>Market conversion premium: the difference between the market conversion price and the current market price of the underlying stock. Convertible bond buyers accept a conversion premium in exchange for the downside protection provided by a convertible bond's fixed income characteristics. As the stock price declines, the price of the convertible bond will not drop below its bond floor value. Usually expressed as on a per-share basis, the market conversion premium is calculated as follows:<sup id="cite_ref-8" class="reference"><a href="#cite_note-8"><span class="cite-bracket">[</span>8<span class="cite-bracket">]</span></a></sup></li></ul> <dl><dd><dl><dd><dl><dd><dl><dd><table class="wikitable"> <tbody><tr> <td>Market conversion premium per share = market conversion price - current market price </td></tr></tbody></table></dd></dl></dd></dl></dd></dl></dd></dl> <ul><li>Parity: Immediate value of the convertible if converted, typically obtained as current stock price multiplied by the conversion ratio expressed for a base of 100. May also be known as Exchange Property.</li></ul> <p>Convertibles may have other features, such as: </p> <ul><li>Call features: The ability of the issuer (on some bonds) to call a bond early for redemption. This should not be mistaken for a call option. A Softcall would refer to a call feature where the issuer can only call under certain circumstances, typically based on the underlying stock price performance (e.g. current stock price is above 130% of the conversion price for 20 days out of 30 days). A Hardcall feature would not need any specific conditions beyond a date: that case the issuer would be able to recall a portion or the totally of the issuance at the Call price (typically par) after a specific date.</li> <li>Put features: The ability of the holder of the bond (the lender) to force the issuer (the borrower) to repay the loan at a date earlier than the maturity. These often occur as windows of opportunity, every three or five years and allow the holders to exercise their right to an early repayment.</li> <li>Contingent conversion (aka CoCo): Restrict the ability of the convertible bondholders to convert into equities. Typically, restrictions would be based on the underlying stock price and/or time (e.g. convertible every quarter if stock price is above 115% of the conversion price).<sup id="cite_ref-9" class="reference"><a href="#cite_note-9"><span class="cite-bracket">[</span>9<span class="cite-bracket">]</span></a></sup> Reverse convertibles in that respect could be seen as a variation of a Mandatory bearing a contingent conversion feature based. More recently some CoCo's issuances have been based on Tier-1 capital ratio for some large bank issuers.</li> <li>Reset: Conversion price would be reset to a new value depending on the underlying stock performance. Typically, would be in cases of underperformance (e.g. if stock price after a year is below 50% of the conversion price the new conversion price would be the current stock price).</li> <li>Change of control event (aka <a href="/wiki/Cliquet" class="mw-redirect" title="Cliquet">Ratchet</a>): Conversion price would be readjusted in case of a take-over on the underlying company. There are many subtype of ratchet formula (e.g. Make-whole base, time dependent...), their impact for the bondholder could be small (e.g. ClubMed, 2013) to significant (e.g. Aegis, 2012). Often, this clause would grant as well the ability for the convertible bondholders to "put" i.e. ask for the early repayment of their bonds.</li> <li>Non-dilutive: The non-dilutive feature has been popularized with the lower interest rates (e.g. in Euro) in order to make convertible issuance still attractive for issuers already benefitting from low interest charges in the straight bond market. In a non-dilutive placement, the issuer would simultaneously enter in an OTC option agreement with the underwriter (or a third party). This option would often match the strike of the convertible as well as its maturity. This would result in cancelling out the dilution in case of a conversion of the convertible at maturity if the stock price is above the strike. Typically, in order to fully prevent dilution the convertible prospectus would constraint possibility of early conversion.<sup id="cite_ref-10" class="reference"><a href="#cite_note-10"><span class="cite-bracket">[</span>10<span class="cite-bracket">]</span></a></sup></li></ul> <div class="mw-heading mw-heading2"><h2 id="Markets_and_investor_profiles">Markets and investor profiles</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Convertible_bond&action=edit&section=11" title="Edit section: Markets and investor profiles"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>The global convertible bond market is relatively small, with about 400 billion USD (as of Jan 2013, excluding synthetics). As a comparison, the straight corporate bond market would be about 14,000 billion USD. Among those 400 billion, about 320 billion USD are "Vanilla" convertible bonds, the largest sub-segment of the asset class. </p><p>Convertibles are not spread equally and some slight differences exist between the different regional markets: </p> <ul><li>North America: About 50% of the global convertible market, mostly from the USA (even if Canada is well represented in the Material sector). This market is more standardised than the others with convertible structures being relatively uniform (e.g. Standard Make-Whole take over features, Contingent Conversion @ 130%). Regarding the trading, the American convertible market is "centralised" around <a href="/wiki/Trade_Reporting_And_Compliance_Engine" class="mw-redirect" title="Trade Reporting And Compliance Engine">TRACE</a> which helps in terms of price transparency. One other particularity of this market is the importance of the Mandatory Convertibles and Preferred especially for Financials (about 10–20% of the issuances in the US regional benchmarks). Most of the trading operation are based in New-York.</li> <li><a href="/wiki/Europe,_the_Middle_East_and_Africa" title="Europe, the Middle East and Africa">EMEA</a>: European, Middle Eastern and African issuances are trading usually out of Europe, London being the biggest node followed by Paris and to a lesser extent Frankfurt and Geneva. It represents about 25% of the global market and shows a greater diversity in terms of structures (e.g. from CoCoCo's to French OCEANE). Because of that lack of standardisation, it is often considered to be more technical and unforgiving than the American market from a trading perspective. A very tiny amount of the volumes is traded on exchange while the vast majority is done <a href="/wiki/Over-the-counter_(finance)" title="Over-the-counter (finance)">OTC</a> without a price reporting system (e.g. like TRACE). Liquidity is significantly lower than on the Northern American market. Trading convention are NOT uniform: French Convertibles would trade dirty in units while the others countries would trade clean in notional equivalent.</li> <li>Asia (ex Japan): This region represents about 17% of the total market, with an overall structure similar to the EMEA market albeit with more standardisation across the issuances. Most of the trading is done in Hong-Kong with a minor portion in Singapore.</li> <li>Japan: This region represents about 8% of the total market as of January 2013 in spite of being in the past comparable in size to the Northern American market. It mostly shrunk because of the low interest environment making the competitive advantage of lowering coupon payment less appealing to issuers. One key specificity of the Japanese market is the offering price of issuance being generally above 100, meaning the investor would effectively bear a negative yield to benefit from the potential equity underlying upside. Most of the trading is done out of Tokyo (and Hong-Kong for some international firms).</li></ul> <p>Convertible bond investors get split into two broad categories: Hedged and Long-only investors. </p> <ul><li>Hedged/Arbitrage/Swap investors: Proprietary trading desk or hedged-funds using as core strategy Convertible Arbitrage which consists in, for its most basic iteration, as being long the convertible bonds while being short the underlying stock. Buying the convertible while selling the stock is often referred to as being "on swap". Hedged investors would modulate their different risks (e.g. Equity, Credit, Interest-Rate, Volatility, Currency) by putting in place one or more hedge (e.g. Short Stock, CDS, Asset Swap, Option, Future). Inherently, market-makers are hedged investors as they would have a trading book during the day and/or overnight held in a hedged fashion to provide the necessary liquidity to pursue their market making operations.</li> <li>Long-only/Outright Investors: Convertible investors who will own the bond for their asymmetric payoff profiles. They would typically be exposed to the various risk. Global convertible funds would typically hedged their currency risk as well as interest rate risk in some occasions, however Volatility, Equity & Credit hedging would typically be excluded from the scope of their strategy.</li></ul> <p>The splits between those investors differ across the regions: In 2013, the American region was dominated by Hedged Investors (about 60%) while EMEA was dominated by Long-Only investors (about 70%). Globally the split is about balanced between the two categories. </p> <div class="mw-heading mw-heading2"><h2 id="Valuation">Valuation</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Convertible_bond&action=edit&section=12" title="Edit section: Valuation"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1236090951"><div role="note" class="hatnote navigation-not-searchable">See also: <a href="/wiki/Bond_option#Embedded_options" title="Bond option">Bond option § Embedded options</a>, and <a href="/wiki/Lattice_model_(finance)#Hybrid_securities" title="Lattice model (finance)">Lattice model (finance) § Hybrid securities</a></div> <p>In theory, the <a href="/wiki/Market_price" class="mw-redirect" title="Market price">market price</a> of a convertible debenture should never drop below its <a href="/wiki/Intrinsic_value_(finance)" title="Intrinsic value (finance)">intrinsic value</a>. The intrinsic value is simply the number of <a href="/wiki/Share_(finance)" title="Share (finance)">shares</a> being converted at <a href="/wiki/Par_value" title="Par value">par value</a> times the current market price of <a href="/wiki/Common_share" class="mw-redirect" title="Common share">common shares</a>. </p><p>The 3 main stages of convertible bond behaviour are: </p> <ul><li>In-the-money: Conversion Price is < Equity Price.</li> <li>At-the-money: Conversion Price is = Equity Price.</li> <li>Out-the-money: Conversion Price is > Equity Price.</li></ul> <p>From a valuation perspective, a convertible bond consists of two assets: a <a href="/wiki/Bond_(finance)" title="Bond (finance)">bond</a> and a <a href="/wiki/Warrant_(finance)" title="Warrant (finance)">warrant</a>. Valuing a convertible requires an assumption of </p> <ol><li>the underlying stock volatility to value the option and</li> <li>the credit spread for the fixed income portion that takes into account the firm's credit profile and the ranking of the convertible within the capital structure.</li></ol> <p>Using the market price of the convertible, one can determine the implied volatility (using the assumed spread) or implied spread (using the assumed volatility). </p><p>This volatility/credit dichotomy is the standard practice for valuing convertibles. What makes convertibles so interesting is that, except in the case of exchangeables (see above), one cannot entirely separate the volatility from the credit. Higher volatility (a good thing) tends to accompany weaker credit (bad). In the case of exchangeables, the credit quality of the issuer may be decoupled from the volatility of the underlying shares. The true artists of convertibles and exchangeables are the people who know how to play this balancing act. </p><p>A simple method for calculating the value of a convertible involves calculating the present value of future <a href="/wiki/Interest" title="Interest">interest</a> and <a href="https://en.wiktionary.org/wiki/principal" class="extiw" title="wikt:principal">principal</a> payments at the <a href="/wiki/Cost_of_debt" class="mw-redirect" title="Cost of debt">cost of debt</a> and adds the present value of the <a href="/wiki/Warrant_(finance)" title="Warrant (finance)">warrant</a>. However, this method ignores certain market realities including stochastic interest rates and credit spreads, and does not take into account popular convertible features such as issuer calls, investor puts, and conversion rate resets. The most popular models for valuing convertibles with these features are <a href="/wiki/Finite_difference_methods_for_option_pricing" title="Finite difference methods for option pricing">finite difference models</a> as well as the more common <a href="/wiki/Binomial_options_pricing_model" title="Binomial options pricing model">binomial trees</a><sup id="cite_ref-11" class="reference"><a href="#cite_note-11"><span class="cite-bracket">[</span>11<span class="cite-bracket">]</span></a></sup> and <a href="/wiki/Trinomial_tree" title="Trinomial tree">trinomial trees</a>. However, also valuation models based on <a href="/wiki/Monte_Carlo_method" title="Monte Carlo method">Monte Carlo methods</a> are available.<sup id="cite_ref-12" class="reference"><a href="#cite_note-12"><span class="cite-bracket">[</span>12<span class="cite-bracket">]</span></a></sup> </p><p>Since 1991–92, most market-makers in Europe have employed binomial models to evaluate convertibles. Models were available from <a href="/wiki/INSEAD" title="INSEAD">INSEAD</a>, Trend Data of Canada, <a href="/wiki/Bloomberg_LP" class="mw-redirect" title="Bloomberg LP">Bloomberg LP</a> and from home-developed models, amongst others. These models needed an input of credit spread, volatility for pricing (historic volatility often used), and the risk-free rate of return. The binomial calculation assumes there is a bell-shaped probability distribution to future share prices, and the higher the volatility, the flatter is the bell-shape. Where there are issuer calls and investor puts, these will affect the expected residual period of optionality, at different share price levels. The binomial value is a weighted expected value, (1) taking readings from all the different nodes of a lattice expanding out from current prices and (2) taking account of varying periods of expected residual optionality at different share price levels.<sup id="cite_ref-13" class="reference"><a href="#cite_note-13"><span class="cite-bracket">[</span>13<span class="cite-bracket">]</span></a></sup> The three biggest areas of subjectivity are (1) the rate of volatility used, for volatility is not constant, and (2) whether or not to incorporate into the model a cost of stock borrow, for hedge funds and market-makers. The third important factor is (3) the dividend status of the equity delivered, if the bond is called, as the issuer may time the calling of the bond to minimise the dividend cost to the issuer. </p> <div class="mw-heading mw-heading2"><h2 id="Risk">Risk</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Convertible_bond&action=edit&section=13" title="Edit section: Risk"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>Convertible bonds are mainly issued by start-up or small companies. The chance of default or large movement in either direction is much higher than well-established firms. Investors should have a keen awareness of significant credit risk and price swing behavior associated with convertible bonds.  Consequently, Valuation models need to capture credit risk and handle potential price jump. </p> <div class="mw-heading mw-heading2"><h2 id="Uses_for_investors">Uses for investors</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Convertible_bond&action=edit&section=14" title="Edit section: Uses for investors"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <ul><li>Convertible bonds are usually issued offering a higher yield than obtainable on the shares into which the bonds convert.</li> <li>Convertible bonds are safer than <a href="/wiki/Preferred_stock" title="Preferred stock">preferred</a> or common shares for the investor. They provide asset protection, because the value of the convertible bond will only fall to the value of the bond floor: however in reality if stock price falls too much the credit spread will increase and the price of the bond will go below the bond floor. At the same time, convertible bonds can provide the possibility of high equity-like returns.</li> <li>Also, convertible bonds are usually less volatile than regular shares. Indeed, a convertible bond behaves like a call option. Therefore, if <i>C</i> is the call price and S the regular share then</li></ul> <dl><dd><dl><dd><span class="mwe-math-element"><span class="mwe-math-mathml-inline mwe-math-mathml-a11y" style="display: none;"><math xmlns="http://www.w3.org/1998/Math/MathML" alttext="{\displaystyle \Delta ={\frac {\delta C}{\delta S}}\Rightarrow \delta C=\Delta \times \delta S.}"> <semantics> <mrow class="MJX-TeXAtom-ORD"> <mstyle displaystyle="true" scriptlevel="0"> <mi mathvariant="normal">Δ</mi> <mo>=</mo> <mrow class="MJX-TeXAtom-ORD"> <mfrac> <mrow> <mi>δ</mi> <mi>C</mi> </mrow> <mrow> <mi>δ</mi> <mi>S</mi> </mrow> </mfrac> </mrow> <mo stretchy="false">⇒</mo> <mi>δ</mi> <mi>C</mi> <mo>=</mo> <mi mathvariant="normal">Δ</mi> <mo>×</mo> <mi>δ</mi> <mi>S</mi> <mo>.</mo> </mstyle> </mrow> <annotation encoding="application/x-tex">{\displaystyle \Delta ={\frac {\delta C}{\delta S}}\Rightarrow \delta C=\Delta \times \delta S.}</annotation> </semantics> </math></span><img src="https://wikimedia.org/api/rest_v1/media/math/render/svg/f98af5a4fe064e695d2c1a78db10866f6ac467a9" class="mwe-math-fallback-image-inline mw-invert skin-invert" aria-hidden="true" style="vertical-align: -2.005ex; width:26.184ex; height:5.509ex;" alt="{\displaystyle \Delta ={\frac {\delta C}{\delta S}}\Rightarrow \delta C=\Delta \times \delta S.}"></span></dd></dl></dd></dl> <p>In consequence, since <span class="mwe-math-element"><span class="mwe-math-mathml-inline mwe-math-mathml-a11y" style="display: none;"><math xmlns="http://www.w3.org/1998/Math/MathML" alttext="{\displaystyle 0<\Delta <1}"> <semantics> <mrow class="MJX-TeXAtom-ORD"> <mstyle displaystyle="true" scriptlevel="0"> <mn>0</mn> <mo><</mo> <mi mathvariant="normal">Δ</mi> <mo><</mo> <mn>1</mn> </mstyle> </mrow> <annotation encoding="application/x-tex">{\displaystyle 0<\Delta <1}</annotation> </semantics> </math></span><img src="https://wikimedia.org/api/rest_v1/media/math/render/svg/f13e63ea645d9f35b1969d12b688697f7182c414" class="mwe-math-fallback-image-inline mw-invert skin-invert" aria-hidden="true" style="vertical-align: -0.338ex; width:10.458ex; height:2.176ex;" alt="{\displaystyle 0<\Delta <1}"></span> we get <span class="mwe-math-element"><span class="mwe-math-mathml-inline mwe-math-mathml-a11y" style="display: none;"><math xmlns="http://www.w3.org/1998/Math/MathML" alttext="{\displaystyle \delta C<\delta S}"> <semantics> <mrow class="MJX-TeXAtom-ORD"> <mstyle displaystyle="true" scriptlevel="0"> <mi>δ</mi> <mi>C</mi> <mo><</mo> <mi>δ</mi> <mi>S</mi> </mstyle> </mrow> <annotation encoding="application/x-tex">{\displaystyle \delta C<\delta S}</annotation> </semantics> </math></span><img src="https://wikimedia.org/api/rest_v1/media/math/render/svg/1f8b61a54ef77124119158787d16d92103fc6fc3" class="mwe-math-fallback-image-inline mw-invert skin-invert" aria-hidden="true" style="vertical-align: -0.338ex; width:8.461ex; height:2.343ex;" alt="{\displaystyle \delta C<\delta S}"></span>, which implies that the variation of <i>C</i> is less than the variation of <i>S</i>, which can be interpreted as less volatility. </p> <ul><li>The simultaneous purchase of convertible bonds and the short sale of the same issuer's common stock is a hedge fund strategy known as <a href="/wiki/Convertible_arbitrage" title="Convertible arbitrage">convertible arbitrage</a>. The motivation for such a strategy is that the equity option embedded in a convertible bond is a source of cheap <a href="/wiki/Volatility_(finance)" title="Volatility (finance)">volatility</a>, which can be exploited by convertible arbitrageurs.</li> <li>In limited circumstances, certain convertible bonds can be <a href="/wiki/Short_selling" class="mw-redirect" title="Short selling">sold short</a>, thus depressing the market value for a stock, and allowing the debt-holder to claim more stock with which to sell short. This is known as <a href="/wiki/Death_spiral_financing" title="Death spiral financing">death spiral financing</a>.</li></ul> <div class="mw-heading mw-heading2"><h2 id="Uses_for_issuers">Uses for issuers</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Convertible_bond&action=edit&section=15" title="Edit section: Uses for issuers"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <div class="mw-heading mw-heading3"><h3 id="Lower_fixed-rate_borrowing_costs">Lower fixed-rate borrowing costs</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Convertible_bond&action=edit&section=16" title="Edit section: Lower fixed-rate borrowing costs"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>Convertible bonds allow issuers to issue debt at a lower cost. Typically, a convertible bond at issue yields 1% to 3% less than straight bonds. </p> <div class="mw-heading mw-heading3"><h3 id="Locking_into_low_fixed–rate_long-term_borrowing"><span id="Locking_into_low_fixed.E2.80.93rate_long-term_borrowing"></span>Locking into low fixed–rate long-term borrowing</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Convertible_bond&action=edit&section=17" title="Edit section: Locking into low fixed–rate long-term borrowing"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>For a finance director watching the trend in interest rates, there is an attraction in trying to catch the lowest point in the cycle to fund with fixed rate debt, or swap variable rate bank borrowings for fixed rate convertible borrowing. Even if the fixed market turns, it may still be possible for a company to borrow via a convertible carrying a lower coupon than ever would have been possible with straight debt funding. </p> <div class="mw-heading mw-heading3"><h3 id="Higher_conversion_price_than_a_rights_issue_strike_price">Higher conversion price than a rights issue strike price</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Convertible_bond&action=edit&section=18" title="Edit section: Higher conversion price than a rights issue strike price"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>Similarly, the conversion price a company fixes on a convertible can be higher than the level that the share price ever reached recently. Compare the equity dilution on a convertible issued on, say, a 20 or 30pct premium to the higher equity dilution on a rights issue, when the new shares are offered on, say, a 15 to 20pct discount to the prevailing share price. </p> <div class="mw-heading mw-heading3"><h3 id="Voting_dilution_deferred">Voting dilution deferred</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Convertible_bond&action=edit&section=19" title="Edit section: Voting dilution deferred"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>With a convertible bond, dilution of the voting rights of existing shareholders only happens on eventual conversion of the bond. However convertible preference shares typically carry voting rights when preference dividends are in arrears. Of course, the bigger voting impact occurs if the issuer decides to issue an exchangeable rather than a convertible. </p> <div class="mw-heading mw-heading3"><h3 id="Increasing_the_total_level_of_debt_gearing">Increasing the total level of debt gearing</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Convertible_bond&action=edit&section=20" title="Edit section: Increasing the total level of debt gearing"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>Convertibles can be used to increase the total amount of debt a company has in issue. The market tends to expect that a company will not increase straight debt beyond certain limits, without it negatively impacting upon the <a href="/wiki/Credit_rating" title="Credit rating">credit rating</a> and the cost of debt. Convertibles can provide additional funding when the straight debt “window” may not be open. Subordination of convertible debt is often regarded as an acceptable risk by investors if the conversion rights are attractive by way of compensation. </p> <div class="mw-heading mw-heading3"><h3 id="Maximising_funding_permitted_under_pre-emption_rules">Maximising funding permitted under pre-emption rules</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Convertible_bond&action=edit&section=21" title="Edit section: Maximising funding permitted under pre-emption rules"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>For countries, such as the UK, where companies are subject to limits on the number of shares that can be offered to non-shareholders non-pre-emptively, convertibles can raise more money than via equity issues. Under the UK's 1989 Guidelines issued by the Investor Protection Committees (IPCs) of the Association of British Insurers (ABI) and the National Association of Pension Fund Managers (NAPF), the IPCs will advise their members not to object to non pre-emptive issues which add no more than 5pct to historic non-diluted balance sheet equity in the period from AGM to AGM, and no more than 7.5pct in total over a period of 3 financial years. The pre-emption limits are calculated on the assumption of 100pct probability of conversion, using the figure of undiluted historic balance sheet share capital (where there is assumed a 0pct probability of conversion). There is no attempt to assign probabilities of conversion in both circumstances, which would result in bigger convertible issues being permitted. The reason for this inconsistency may lie in the fact that the Pre Emption Guidelines were drawn up in 1989, and binomial evaluations were not commonplace amongst professional investors until 1991–92. </p> <div class="mw-heading mw-heading3"><h3 id="Premium_redemption_convertibles">Premium redemption convertibles</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Convertible_bond&action=edit&section=22" title="Edit section: Premium redemption convertibles"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>Premium redemption convertibles such as the majority of French convertibles and zero-coupon Liquid Yield Option Notes (LYONs), provide a fixed interest return at issue which is significantly (or completely) accounted for by the appreciation to the redemption price. If, however, the bonds are converted by investors before the maturity date, the issuer will have benefited by having issued the bonds on a low or even zero-coupon. The higher the premium redemption price, the more the shares have to travel for conversion to take place before the maturity date, and the lower the conversion premium has to be at issue to ensure that the conversion rights are credible. </p> <div class="mw-heading mw-heading3"><h3 id="Takeover_paper">Takeover paper</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Convertible_bond&action=edit&section=23" title="Edit section: Takeover paper"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>Convertibles have a place as the currency used in takeovers. The bidder can offer a higher income on a convertible than the dividend yield on a bid victim's shares, without having to raise the dividend yield on all the bidder's shares. This eases the process for a bidder with low-yield shares acquiring a company with higher-yielding shares. Perversely, the lower the yield on the bidder's shares, the easier it is for the bidder to create a higher conversion premium on the convertible, with consequent benefits for the mathematics of the takeover. In the 1980s, UK domestic convertibles accounted for about 80pct of the European convertibles market, and over 80pct of these were issued either as takeover currency or as funding for takeovers. They had several cosmetic attractions. </p> <dl><dd>The pro-forma fully diluted earnings per share shows none of the extra cost of servicing the convertible up to the conversion day irrespective of whether the coupon was 10pct or 15pct. The fully diluted earnings per share is also calculated on a smaller number of shares than if equity was used as the takeover currency.</dd></dl> <dl><dd>In some countries (such as Finland) convertibles of various structures may be treated as equity by the local accounting profession. In such circumstances, the accounting treatment may result in less pro-forma debt than if straight debt was used as takeover currency or to fund an acquisition. The perception was that gearing was less with a convertible than if straight debt was used instead. In the UK the <a href="/wiki/International_Accounting_Standards_Committee" title="International Accounting Standards Committee">predecessor</a> to the <a href="/wiki/International_Accounting_Standards_Board" title="International Accounting Standards Board">International Accounting Standards Board</a> (IASB) put a stop to treating convertible preference shares as equity. Instead it has to be classified both as preference capital and as convertible as well.</dd></dl> <dl><dd>Nevertheless, none of the (possibly substantial) preference dividend cost incurred when servicing a convertible preference share is visible in the pro-forma consolidated pretax profits statement.</dd></dl> <dl><dd></dd></dl> <div class="mw-heading mw-heading3"><h3 id="Tax_advantages">Tax advantages</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Convertible_bond&action=edit&section=24" title="Edit section: Tax advantages"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>The market for convertibles is primarily pitched towards the non taxpaying investor. The price will substantially reflect the value of the underlying shares, the discounted gross income advantage of the convertible over the underlying shares, plus some figure for the embedded optionality of the bond. The tax advantage is greatest with mandatory convertibles. Effectively a high tax-paying shareholder can benefit from the company securitising gross future income on the convertible, income which it can offset against taxable profits. </p> <div class="mw-heading mw-heading2"><h2 id="2010_U.S._equity-linked_underwriting_league_table">2010 U.S. equity-linked underwriting league table</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Convertible_bond&action=edit&section=25" title="Edit section: 2010 U.S. equity-linked underwriting league table"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <table class="wikitable"> <tbody><tr> <th>Rank </th> <th>Underwriter </th> <th>Market share (%) </th> <th>Amount ($m) </th></tr> <tr> <td>1 </td> <td>J.P. Morgan </td> <td>21.0 </td> <td>$7,359.72 </td></tr> <tr> <td>2 </td> <td>Bank of America Merrill Lynch </td> <td>15.3 </td> <td>$5,369.23 </td></tr> <tr> <td>3 </td> <td>Goldman Sachs & Co </td> <td>12.5 </td> <td>$4,370.56 </td></tr> <tr> <td>4 </td> <td>Morgan Stanley </td> <td>8.8 </td> <td>$3,077.95 </td></tr> <tr> <td>5 </td> <td>Deutsche Bank AG </td> <td>7.8 </td> <td>$2,748.52 </td></tr> <tr> <td>6 </td> <td>Citi </td> <td>7.5 </td> <td>$2,614.43 </td></tr> <tr> <td>7 </td> <td>Credit Suisse </td> <td>6.9 </td> <td>$2,405.97 </td></tr> <tr> <td>8 </td> <td>Barclays Capital </td> <td>5.6 </td> <td>$1,969.22 </td></tr> <tr> <td>9 </td> <td>UBS </td> <td>4.5 </td> <td>$1,589.20 </td></tr> <tr> <td>10 </td> <td>Jefferies Group Inc </td> <td>4.3 </td> <td>$1,522.50 </td></tr></tbody></table> <p>Source: <a href="/wiki/Bloomberg_L.P." title="Bloomberg L.P.">Bloomberg</a> </p> <div class="mw-heading mw-heading2"><h2 id="See_also">See also</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Convertible_bond&action=edit&section=26" title="Edit section: See also"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <ul><li><a href="/wiki/Contingent_convertible_bond" title="Contingent convertible bond">Contingent convertible bond</a></li> <li><a href="/wiki/Preferred_stock" title="Preferred stock">Preferred stock</a></li> <li><a href="/wiki/Convertible_security" title="Convertible security">Convertible security</a></li> <li><a href="/wiki/Equity-linked_note" title="Equity-linked note">Equity-linked note</a></li> <li><a href="/wiki/Exchangeable_bond" title="Exchangeable bond">Exchangeable bond</a></li> <li><a href="/wiki/Liquidation_preference" title="Liquidation preference">Liquidation preference</a></li></ul> <div class="mw-heading mw-heading2"><h2 id="References">References</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Convertible_bond&action=edit&section=27" title="Edit section: References"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <style data-mw-deduplicate="TemplateStyles:r1239543626">.mw-parser-output .reflist{margin-bottom:0.5em;list-style-type:decimal}@media screen{.mw-parser-output .reflist{font-size:90%}}.mw-parser-output .reflist .references{font-size:100%;margin-bottom:0;list-style-type:inherit}.mw-parser-output .reflist-columns-2{column-width:30em}.mw-parser-output .reflist-columns-3{column-width:25em}.mw-parser-output .reflist-columns{margin-top:0.3em}.mw-parser-output .reflist-columns ol{margin-top:0}.mw-parser-output .reflist-columns li{page-break-inside:avoid;break-inside:avoid-column}.mw-parser-output .reflist-upper-alpha{list-style-type:upper-alpha}.mw-parser-output .reflist-upper-roman{list-style-type:upper-roman}.mw-parser-output .reflist-lower-alpha{list-style-type:lower-alpha}.mw-parser-output .reflist-lower-greek{list-style-type:lower-greek}.mw-parser-output .reflist-lower-roman{list-style-type:lower-roman}</style><div class="reflist"> <div class="mw-references-wrap mw-references-columns"><ol class="references"> <li id="cite_note-1"><span class="mw-cite-backlink"><b><a href="#cite_ref-1">^</a></b></span> <span class="reference-text"><style data-mw-deduplicate="TemplateStyles:r1238218222">.mw-parser-output cite.citation{font-style:inherit;word-wrap:break-word}.mw-parser-output .citation q{quotes:"\"""\"""'""'"}.mw-parser-output .citation:target{background-color:rgba(0,127,255,0.133)}.mw-parser-output .id-lock-free.id-lock-free a{background:url("//upload.wikimedia.org/wikipedia/commons/6/65/Lock-green.svg")right 0.1em center/9px no-repeat}.mw-parser-output .id-lock-limited.id-lock-limited a,.mw-parser-output .id-lock-registration.id-lock-registration a{background:url("//upload.wikimedia.org/wikipedia/commons/d/d6/Lock-gray-alt-2.svg")right 0.1em center/9px no-repeat}.mw-parser-output .id-lock-subscription.id-lock-subscription a{background:url("//upload.wikimedia.org/wikipedia/commons/a/aa/Lock-red-alt-2.svg")right 0.1em center/9px no-repeat}.mw-parser-output .cs1-ws-icon a{background:url("//upload.wikimedia.org/wikipedia/commons/4/4c/Wikisource-logo.svg")right 0.1em center/12px no-repeat}body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-free a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-limited a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-registration a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-subscription a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .cs1-ws-icon a{background-size:contain;padding:0 1em 0 0}.mw-parser-output .cs1-code{color:inherit;background:inherit;border:none;padding:inherit}.mw-parser-output .cs1-hidden-error{display:none;color:var(--color-error,#d33)}.mw-parser-output .cs1-visible-error{color:var(--color-error,#d33)}.mw-parser-output .cs1-maint{display:none;color:#085;margin-left:0.3em}.mw-parser-output .cs1-kern-left{padding-left:0.2em}.mw-parser-output .cs1-kern-right{padding-right:0.2em}.mw-parser-output .citation .mw-selflink{font-weight:inherit}@media screen{.mw-parser-output .cs1-format{font-size:95%}html.skin-theme-clientpref-night .mw-parser-output .cs1-maint{color:#18911f}}@media screen and (prefers-color-scheme:dark){html.skin-theme-clientpref-os .mw-parser-output .cs1-maint{color:#18911f}}</style><cite id="CITEREFScatizzi2009" class="citation news cs1">Scatizzi, Cara (February 2009). <a rel="nofollow" class="external text" href="http://www.aaii.com/journal/article/convertible-bonds.touch">"Convertible Bonds"</a>. The AAII Journal<span class="reference-accessdate">. Retrieved <span class="nowrap">8 September</span> 2015</span>.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Ajournal&rft.genre=article&rft.atitle=Convertible+Bonds&rft.date=2009-02&rft.aulast=Scatizzi&rft.aufirst=Cara&rft_id=http%3A%2F%2Fwww.aaii.com%2Fjournal%2Farticle%2Fconvertible-bonds.touch&rfr_id=info%3Asid%2Fen.wikipedia.org%3AConvertible+bond" class="Z3988"></span></span> </li> <li id="cite_note-2"><span class="mw-cite-backlink"><b><a href="#cite_ref-2">^</a></b></span> <span class="reference-text"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1238218222"><cite id="CITEREFJerry_W._Markham2002" class="citation book cs1">Jerry W. Markham (2002). <i>A Financial History of the United States: From Christopher Columbus to the Robber Barons</i>. <a href="/wiki/M._E._Sharpe" title="M. E. Sharpe">M. E. Sharpe</a>. p. 161. <a href="/wiki/ISBN_(identifier)" class="mw-redirect" title="ISBN (identifier)">ISBN</a> <a href="/wiki/Special:BookSources/0-7656-0730-1" title="Special:BookSources/0-7656-0730-1"><bdi>0-7656-0730-1</bdi></a>.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Abook&rft.genre=book&rft.btitle=A+Financial+History+of+the+United+States%3A+From+Christopher+Columbus+to+the+Robber+Barons&rft.pages=161&rft.pub=M.+E.+Sharpe&rft.date=2002&rft.isbn=0-7656-0730-1&rft.au=Jerry+W.+Markham&rfr_id=info%3Asid%2Fen.wikipedia.org%3AConvertible+bond" class="Z3988"></span></span> </li> <li id="cite_note-3"><span class="mw-cite-backlink"><b><a href="#cite_ref-3">^</a></b></span> <span class="reference-text"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1238218222"><cite id="CITEREFAmmannKindWilde2003" class="citation journal cs1">Ammann, Manuel; Kind, Axel; Wilde, Christian (2003). "Are Convertible Bonds Underpriced?: An Analysis of the French Market". <i>Journal of Banking and Finance</i>. <b>27</b> (4): 635–653. <a href="/wiki/Doi_(identifier)" class="mw-redirect" title="Doi (identifier)">doi</a>:<a rel="nofollow" class="external text" href="https://doi.org/10.1016%2FS0378-4266%2801%2900256-4">10.1016/S0378-4266(01)00256-4</a>. <a href="/wiki/SSRN_(identifier)" class="mw-redirect" title="SSRN (identifier)">SSRN</a> <a rel="nofollow" class="external text" href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=268470">268470</a>.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Ajournal&rft.genre=article&rft.jtitle=Journal+of+Banking+and+Finance&rft.atitle=Are+Convertible+Bonds+Underpriced%3F%3A+An+Analysis+of+the+French+Market&rft.volume=27&rft.issue=4&rft.pages=635-653&rft.date=2003&rft_id=https%3A%2F%2Fpapers.ssrn.com%2Fsol3%2Fpapers.cfm%3Fabstract_id%3D268470%23id-name%3DSSRN&rft_id=info%3Adoi%2F10.1016%2FS0378-4266%2801%2900256-4&rft.aulast=Ammann&rft.aufirst=Manuel&rft.au=Kind%2C+Axel&rft.au=Wilde%2C+Christian&rfr_id=info%3Asid%2Fen.wikipedia.org%3AConvertible+bond" class="Z3988"></span></span> </li> <li id="cite_note-4"><span class="mw-cite-backlink"><b><a href="#cite_ref-4">^</a></b></span> <span class="reference-text"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1238218222"><cite id="CITEREFGilsonSchizer2003" class="citation journal cs1">Gilson, Ronald; Schizer, David (2003). <a rel="nofollow" class="external text" href="https://scholarship.law.columbia.edu/faculty_scholarship/1264">"Understanding Venture Capital Structure: A Tax Explanation for Convertible Preferred Stock"</a>. <i>Harvard Law Review</i>. <b>116</b> (3): 874–916. <a href="/wiki/Doi_(identifier)" class="mw-redirect" title="Doi (identifier)">doi</a>:<a rel="nofollow" class="external text" href="https://doi.org/10.2307%2F1342584">10.2307/1342584</a>. <a href="/wiki/JSTOR_(identifier)" class="mw-redirect" title="JSTOR (identifier)">JSTOR</a> <a rel="nofollow" class="external text" href="https://www.jstor.org/stable/1342584">1342584</a>.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Ajournal&rft.genre=article&rft.jtitle=Harvard+Law+Review&rft.atitle=Understanding+Venture+Capital+Structure%3A+A+Tax+Explanation+for+Convertible+Preferred+Stock&rft.volume=116&rft.issue=3&rft.pages=874-916&rft.date=2003&rft_id=info%3Adoi%2F10.2307%2F1342584&rft_id=https%3A%2F%2Fwww.jstor.org%2Fstable%2F1342584%23id-name%3DJSTOR&rft.aulast=Gilson&rft.aufirst=Ronald&rft.au=Schizer%2C+David&rft_id=https%3A%2F%2Fscholarship.law.columbia.edu%2Ffaculty_scholarship%2F1264&rfr_id=info%3Asid%2Fen.wikipedia.org%3AConvertible+bond" class="Z3988"></span></span> </li> <li id="cite_note-5"><span class="mw-cite-backlink"><b><a href="#cite_ref-5">^</a></b></span> <span class="reference-text"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1238218222"><cite id="CITEREFFabozzi1996" class="citation book cs1">Fabozzi, Frank J. (1996). <i>Bond Markets, Analysis and Strategies</i> (third ed.). Upper Saddle River, NJ: Prentice-Hall, Inc. p. 376. <a href="/wiki/ISBN_(identifier)" class="mw-redirect" title="ISBN (identifier)">ISBN</a> <a href="/wiki/Special:BookSources/0-13-339151-5" title="Special:BookSources/0-13-339151-5"><bdi>0-13-339151-5</bdi></a>.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Abook&rft.genre=book&rft.btitle=Bond+Markets%2C+Analysis+and+Strategies&rft.place=Upper+Saddle+River%2C+NJ&rft.pages=376&rft.edition=third&rft.pub=Prentice-Hall%2C+Inc.&rft.date=1996&rft.isbn=0-13-339151-5&rft.aulast=Fabozzi&rft.aufirst=Frank+J.&rfr_id=info%3Asid%2Fen.wikipedia.org%3AConvertible+bond" class="Z3988"></span></span> </li> <li id="cite_note-6"><span class="mw-cite-backlink"><b><a href="#cite_ref-6">^</a></b></span> <span class="reference-text"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1238218222"><cite id="CITEREFRitchie_Jr.1997" class="citation book cs1">Ritchie Jr., John C. (1997). <i>The Handbook of Fixed Income Securities, Frank J. Fabozzi ed</i> (5th ed.). New York: McGraw Hill. p. 296. <a href="/wiki/ISBN_(identifier)" class="mw-redirect" title="ISBN (identifier)">ISBN</a> <a href="/wiki/Special:BookSources/0-7863-1095-2" title="Special:BookSources/0-7863-1095-2"><bdi>0-7863-1095-2</bdi></a>.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Abook&rft.genre=book&rft.btitle=The+Handbook+of+Fixed+Income+Securities%2C+Frank+J.+Fabozzi+ed.&rft.place=New+York&rft.pages=296&rft.edition=5th&rft.pub=McGraw+Hill&rft.date=1997&rft.isbn=0-7863-1095-2&rft.aulast=Ritchie+Jr.&rft.aufirst=John+C.&rfr_id=info%3Asid%2Fen.wikipedia.org%3AConvertible+bond" class="Z3988"></span></span> </li> <li id="cite_note-7"><span class="mw-cite-backlink"><b><a href="#cite_ref-7">^</a></b></span> <span class="reference-text"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1238218222"><cite class="citation book cs1"><i>Fabozzi op cit</i>. p. 376.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Abook&rft.genre=book&rft.btitle=Fabozzi+op+cit&rft.pages=376&rfr_id=info%3Asid%2Fen.wikipedia.org%3AConvertible+bond" class="Z3988"></span></span> </li> <li id="cite_note-8"><span class="mw-cite-backlink"><b><a href="#cite_ref-8">^</a></b></span> <span class="reference-text"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1238218222"><cite class="citation book cs1"><i>Fabozzi op cit</i>. p. 376.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Abook&rft.genre=book&rft.btitle=Fabozzi+op+cit&rft.pages=376&rfr_id=info%3Asid%2Fen.wikipedia.org%3AConvertible+bond" class="Z3988"></span></span> </li> <li id="cite_note-9"><span class="mw-cite-backlink"><b><a href="#cite_ref-9">^</a></b></span> <span class="reference-text"><sup class="noprint Inline-Template"><span style="white-space: nowrap;">[<i><a href="/wiki/Wikipedia:Link_rot" title="Wikipedia:Link rot"><span title=" Dead link tagged February 2019">dead link</span></a></i><span style="visibility:hidden; color:transparent; padding-left:2px">‍</span>]</span></sup><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1238218222"><cite id="CITEREFHirst,_Gary2013" class="citation web cs1">Hirst, Gary (June 21, 2013). <a rel="nofollow" class="external text" href="http://garyhirst.com/cocos-by-gary-hirst/">"Cocos: Contingent Convertible Capital Notes and Insurance Reserves"</a>. <i>garyhirst.com</i><span class="reference-accessdate">. Retrieved <span class="nowrap">April 13,</span> 2014</span>.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Ajournal&rft.genre=unknown&rft.jtitle=garyhirst.com&rft.atitle=Cocos%3A+Contingent+Convertible+Capital+Notes+and+Insurance+Reserves&rft.date=2013-06-21&rft.au=Hirst%2C+Gary&rft_id=http%3A%2F%2Fgaryhirst.com%2Fcocos-by-gary-hirst%2F&rfr_id=info%3Asid%2Fen.wikipedia.org%3AConvertible+bond" class="Z3988"></span></span> </li> <li id="cite_note-10"><span class="mw-cite-backlink"><b><a href="#cite_ref-10">^</a></b></span> <span class="reference-text">See: <a href="/wiki/Dilutive_security" title="Dilutive security">Dilutive security</a> and <a href="/wiki/Diluted_EPS" class="mw-redirect" title="Diluted EPS">Diluted EPS</a></span> </li> <li id="cite_note-11"><span class="mw-cite-backlink"><b><a href="#cite_ref-11">^</a></b></span> <span class="reference-text"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1238218222"><cite id="CITEREFAmmannKindWilde2003" class="citation journal cs1">Ammann, Manuel; Kind, Axel; Wilde, Christian (2003). "Are Convertible Bonds Underpriced?: An Analysis of the French Market". <i>Journal of Banking and Finance</i>. <b>27</b> (4): 635–653. <a href="/wiki/Doi_(identifier)" class="mw-redirect" title="Doi (identifier)">doi</a>:<a rel="nofollow" class="external text" href="https://doi.org/10.1016%2FS0378-4266%2801%2900256-4">10.1016/S0378-4266(01)00256-4</a>. <a href="/wiki/SSRN_(identifier)" class="mw-redirect" title="SSRN (identifier)">SSRN</a> <a rel="nofollow" class="external text" href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=268470">268470</a>.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Ajournal&rft.genre=article&rft.jtitle=Journal+of+Banking+and+Finance&rft.atitle=Are+Convertible+Bonds+Underpriced%3F%3A+An+Analysis+of+the+French+Market&rft.volume=27&rft.issue=4&rft.pages=635-653&rft.date=2003&rft_id=https%3A%2F%2Fpapers.ssrn.com%2Fsol3%2Fpapers.cfm%3Fabstract_id%3D268470%23id-name%3DSSRN&rft_id=info%3Adoi%2F10.1016%2FS0378-4266%2801%2900256-4&rft.aulast=Ammann&rft.aufirst=Manuel&rft.au=Kind%2C+Axel&rft.au=Wilde%2C+Christian&rfr_id=info%3Asid%2Fen.wikipedia.org%3AConvertible+bond" class="Z3988"></span></span> </li> <li id="cite_note-12"><span class="mw-cite-backlink"><b><a href="#cite_ref-12">^</a></b></span> <span class="reference-text"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1238218222"><cite id="CITEREFAmmannKindWilde2007" class="citation journal cs1">Ammann, Manuel; Kind, Axel; Wilde, Christian (2007). <a rel="nofollow" class="external text" href="https://www.alexandria.unisg.ch/38377/1/PubsAmmann2007_Convertibles_JEF.pdf">"Simulation-Based Pricing of Convertible Bonds"</a> <span class="cs1-format">(PDF)</span>. <i>Journal of Empirical Finance</i>. <a href="/wiki/Doi_(identifier)" class="mw-redirect" title="Doi (identifier)">doi</a>:<a rel="nofollow" class="external text" href="https://doi.org/10.2139%2Fssrn.762804">10.2139/ssrn.762804</a>. <a href="/wiki/S2CID_(identifier)" class="mw-redirect" title="S2CID (identifier)">S2CID</a> <a rel="nofollow" class="external text" href="https://api.semanticscholar.org/CorpusID:233758183">233758183</a>.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Ajournal&rft.genre=article&rft.jtitle=Journal+of+Empirical+Finance&rft.atitle=Simulation-Based+Pricing+of+Convertible+Bonds&rft.date=2007&rft_id=info%3Adoi%2F10.2139%2Fssrn.762804&rft_id=https%3A%2F%2Fapi.semanticscholar.org%2FCorpusID%3A233758183%23id-name%3DS2CID&rft.aulast=Ammann&rft.aufirst=Manuel&rft.au=Kind%2C+Axel&rft.au=Wilde%2C+Christian&rft_id=https%3A%2F%2Fwww.alexandria.unisg.ch%2F38377%2F1%2FPubsAmmann2007_Convertibles_JEF.pdf&rfr_id=info%3Asid%2Fen.wikipedia.org%3AConvertible+bond" class="Z3988"></span></span> </li> <li id="cite_note-13"><span class="mw-cite-backlink"><b><a href="#cite_ref-13">^</a></b></span> <span class="reference-text">See <a href="/wiki/Lattice_model_(finance)#Hybrid_securities" title="Lattice model (finance)">Lattice model (finance)#Hybrid securities</a></span> </li> </ol></div></div> <div class="mw-heading mw-heading2"><h2 id="Further_reading">Further reading</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Convertible_bond&action=edit&section=28" title="Edit section: Further reading"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <ul><li>FinPricing. <a rel="nofollow" class="external text" href="https://www.finpricing.com/lib/FiBond.html"><i>Bond valuation practical guide and calculator tool.</i></a></li> <li>Max, Kevin. <a rel="nofollow" class="external text" href="https://www.barrons.com/articles/future-returns-the-case-for-convertible-bonds-01575384134"><i>Future Returns: The Case for Convertible Bonds.</i></a> Barron's. December 3, 2019.</li> <li>Xiao, Tim. <a rel="nofollow" class="external text" href="https://hal.archives-ouvertes.fr/hal-01812927"><i>A simple and precise method for pricing convertible bonds with credit risk.</i></a> Journal of Derivatives & Hedge Funds, volume 19, issue 4. Pages 259–277.</li></ul> <div class="mw-heading mw-heading2"><h2 id="External_links">External links</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Convertible_bond&action=edit&section=29" title="Edit section: External links"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <ul><li><a rel="nofollow" class="external text" href="https://web.archive.org/web/20190610203212/https://www.wsgr.com/WSGR/Display.aspx?SectionName=practice%2Ftermsheet-convertible.htm">Convertible Note Term Sheet Generator from Wilson Sonsini Goodrich & Rosati</a></li> <li><a rel="nofollow" class="external text" href="http://www.cs.toronto.edu/pub/reports/na/lucy-05-msc.pdf">Pricing Convertible Bonds using Partial Differential Equations – by Lucy Li</a></li> <li><a rel="nofollow" class="external text" href="https://ssrn.com/abstract=1294420">Pricing Inflation-Indexed Convertible Bonds – by Landskroner and Raviv</a></li> <li><a rel="nofollow" class="external text" href="https://www.youtube.com/watch?feature=player_detailpage&list=UUm_WkN0wg49-eG4SymAQ_4g&v=qhRD64AlBrU#t=3485">Harvard i-lab | Foundations of Financings and Capital Raising for Startups</a>. Explains both plain convertible debt and a simplified form of convertible debt called <a href="/wiki/SAFE_(Simple_Agreement_for_Future_Equity)" class="mw-redirect" title="SAFE (Simple Agreement for Future Equity)">SAFE (Simple Agreement for Future Equity)</a></li></ul> <div class="navbox-styles"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><style data-mw-deduplicate="TemplateStyles:r1236075235">.mw-parser-output .navbox{box-sizing:border-box;border:1px solid #a2a9b1;width:100%;clear:both;font-size:88%;text-align:center;padding:1px;margin:1em auto 0}.mw-parser-output .navbox .navbox{margin-top:0}.mw-parser-output .navbox+.navbox,.mw-parser-output .navbox+.navbox-styles+.navbox{margin-top:-1px}.mw-parser-output .navbox-inner,.mw-parser-output .navbox-subgroup{width:100%}.mw-parser-output .navbox-group,.mw-parser-output .navbox-title,.mw-parser-output .navbox-abovebelow{padding:0.25em 1em;line-height:1.5em;text-align:center}.mw-parser-output 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navbar-mini"><ul><li class="nv-view"><a href="/wiki/Template:Bond_market" title="Template:Bond market"><abbr title="View this template">v</abbr></a></li><li class="nv-talk"><a href="/wiki/Template_talk:Bond_market" title="Template talk:Bond market"><abbr title="Discuss this template">t</abbr></a></li><li class="nv-edit"><a href="/wiki/Special:EditPage/Template:Bond_market" title="Special:EditPage/Template:Bond market"><abbr title="Edit this template">e</abbr></a></li></ul></div><div id="Bond_market" style="font-size:114%;margin:0 4em"><a href="/wiki/Bond_market" title="Bond market">Bond market</a></div></th></tr><tr><td class="navbox-abovebelow" colspan="2"><div> <ul><li><a href="/wiki/Bond_(finance)" title="Bond (finance)">Bond</a></li> <li><a href="/wiki/Debenture" title="Debenture">Debenture</a></li> <li><a href="/wiki/Fixed_income" title="Fixed income">Fixed income</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%">Types of bonds by issuer</th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Agency_debt" title="Agency debt">Agency bond</a></li> <li><a href="/wiki/Corporate_bond" title="Corporate bond">Corporate bond</a> <ul><li><a href="/wiki/Senior_debt" title="Senior debt">Senior debt</a></li> <li><a href="/wiki/Subordinated_debt" title="Subordinated debt">Subordinated debt</a></li></ul></li> <li><a href="/wiki/Distressed_securities" title="Distressed securities">Distressed debt</a></li> <li><a href="/wiki/Government_bond" title="Government bond">Government bond</a></li> <li><a href="/wiki/Infrastructure_bond" title="Infrastructure bond">Infrastructure bond</a></li> <li><a href="/wiki/Municipal_bond" title="Municipal bond">Municipal bond</a></li> <li><a href="/wiki/Global_bond" title="Global bond">Global bond</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%">Types of bonds by payout</th><td class="navbox-list-with-group navbox-list navbox-even" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Accrual_bond" title="Accrual bond">Accrual bond</a></li> <li><a href="/wiki/Auction_rate_security" title="Auction rate security">Auction rate security</a></li> <li><a href="/wiki/Callable_bond" title="Callable bond">Callable bond</a></li> <li><a href="/wiki/Commercial_paper" title="Commercial paper">Commercial paper</a></li> <li><a href="/wiki/Consol_(bond)" title="Consol (bond)">Consol</a></li> <li><a href="/wiki/Contingent_convertible_bond" title="Contingent convertible bond">Contingent convertible bond</a></li> <li><a class="mw-selflink selflink">Convertible bond</a></li> <li><a href="/wiki/Exchangeable_bond" title="Exchangeable bond">Exchangeable bond</a></li> <li><a href="/wiki/Extendible_bond" title="Extendible bond">Extendible bond</a></li> <li><a href="/wiki/Fixed_rate_bond" class="mw-redirect" title="Fixed rate bond">Fixed rate bond</a></li> <li><a href="/wiki/Floating_rate_note" title="Floating rate note">Floating rate note</a></li> <li><a href="/wiki/High-yield_debt" title="High-yield debt">High-yield debt</a></li> <li><a href="/wiki/Inflation-indexed_bond" title="Inflation-indexed bond">Inflation-indexed bond</a></li> <li><a href="/wiki/Inverse_floating_rate_note" title="Inverse floating rate note">Inverse floating rate note</a></li> <li><a href="/wiki/Lottery_bond" title="Lottery bond">Lottery bond</a></li> <li><a href="/wiki/Perpetual_bond" title="Perpetual bond">Perpetual bond</a></li> <li><a href="/wiki/Puttable_bond" title="Puttable bond">Puttable bond</a></li> <li><a href="/wiki/Reverse_convertible_securities" title="Reverse convertible securities">Reverse convertible securities</a></li> <li><a href="/wiki/Zero-coupon_bond" title="Zero-coupon bond">Zero-coupon bond</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%"><a href="/wiki/Bond_valuation" title="Bond valuation">Bond valuation</a></th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Clean_price" title="Clean price">Clean price</a></li> <li><a href="/wiki/Bond_convexity" title="Bond convexity">Convexity</a></li> <li><a href="/wiki/Coupon_(finance)" title="Coupon (finance)">Coupon</a></li> <li><a href="/wiki/Yield_spread" title="Yield spread">Credit spread</a></li> <li><a href="/wiki/Current_yield" title="Current yield">Current yield</a></li> <li><a href="/wiki/Dirty_price" title="Dirty price">Dirty price</a></li> <li><a href="/wiki/Bond_duration" class="mw-redirect" title="Bond duration">Duration</a></li> <li><a href="/wiki/I-spread" title="I-spread">I-spread</a></li> <li><a href="/wiki/Mortgage_yield" title="Mortgage yield">Mortgage yield</a></li> <li><a href="/wiki/Nominal_yield" title="Nominal yield">Nominal yield</a></li> <li><a href="/wiki/Option-adjusted_spread" title="Option-adjusted spread">Option-adjusted spread</a></li> <li><a href="/wiki/Risk-free_bond" title="Risk-free bond">Risk-free bond</a></li> <li><a href="/wiki/Weighted-average_life" title="Weighted-average life">Weighted-average life</a></li> <li><a href="/wiki/Yield_curve" title="Yield curve">Yield curve</a></li> <li><a href="/wiki/Yield_spread" title="Yield spread">Yield spread</a></li> <li><a href="/wiki/Yield_to_maturity" title="Yield to maturity">Yield to maturity</a></li> <li><a href="/wiki/Z-spread" title="Z-spread">Z-spread</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%">Securitized products</th><td class="navbox-list-with-group navbox-list navbox-even" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Asset-backed_security" title="Asset-backed security">Asset-backed security</a></li> <li><a href="/wiki/Collateralized_debt_obligation" title="Collateralized debt obligation">Collateralized debt obligation</a></li> <li><a href="/wiki/Collateralized_mortgage_obligation" title="Collateralized mortgage obligation">Collateralized mortgage obligation</a></li> <li><a href="/wiki/Commercial_mortgage-backed_security" title="Commercial mortgage-backed security">Commercial mortgage-backed security</a></li> <li><a href="/wiki/Mortgage-backed_security" title="Mortgage-backed security">Mortgage-backed security</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%"><a href="/wiki/Bond_option" title="Bond option">Bond options</a></th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Callable_bond" title="Callable bond">Callable bond</a></li> <li><a class="mw-selflink selflink">Convertible bond</a></li> <li><a href="/wiki/Embedded_option" title="Embedded option">Embedded option</a></li> <li><a href="/wiki/Exchangeable_bond" title="Exchangeable bond">Exchangeable bond</a></li> <li><a href="/wiki/Extendible_bond" title="Extendible bond">Extendible bond</a></li> <li><a href="/wiki/Puttable_bond" title="Puttable bond">Puttable bond</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%">Institutions</th><td class="navbox-list-with-group navbox-list navbox-even" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Commercial_Mortgage_Securities_Association" title="Commercial Mortgage Securities Association">Commercial Mortgage Securities Association</a> (CMSA)</li> <li><a href="/wiki/International_Capital_Market_Association" title="International Capital Market Association">International Capital Market Association</a> (ICMA)</li> <li><a href="/wiki/Securities_Industry_and_Financial_Markets_Association" title="Securities Industry and Financial Markets Association">Securities Industry and Financial Markets Association</a> (SIFMA)</li></ul> </div></td></tr></tbody></table></div> <div class="navbox-styles"><link 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style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a class="mw-selflink selflink">Convertible debt</a></li> <li><a href="/wiki/Exchangeable_bond" title="Exchangeable bond">Exchangeable debt</a></li> <li><a href="/wiki/Mezzanine_capital" title="Mezzanine capital">Mezzanine debt</a></li> <li><a href="/wiki/Pari_passu#In_lending,_bankruptcy_and_default" title="Pari passu">Pari passu</a></li> <li><a href="/wiki/Preferred_stock" title="Preferred stock">Preferred equity</a></li> <li><a href="/wiki/Second_lien_loan" title="Second lien loan">Second lien debt</a></li> <li><a href="/wiki/Senior_debt" title="Senior debt">Senior debt</a></li> <li><a href="/wiki/Secured_loan" title="Secured loan">Senior secured debt</a></li> <li><a href="/wiki/Shareholder_loan" title="Shareholder loan">Shareholder loan</a></li> <li><a href="/wiki/Stock" title="Stock">Stock</a></li> <li><a href="/wiki/Subordinated_debt" title="Subordinated debt">Subordinated debt</a></li> <li><a href="/wiki/Warrant_(finance)" title="Warrant (finance)">Warrant</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%;line-height:1.3em; text-align:left;">Transactions<br /><span class="nobold">(terms/conditions)</span></th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"></div><table class="nowraplinks navbox-subgroup" style="border-spacing:0"><tbody><tr><th scope="row" class="navbox-group" style="width:1%;line-height:1.3em;"><a href="/wiki/Public_offering" title="Public offering">Equity offerings</a></th><td class="navbox-list-with-group navbox-list navbox-even" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/At-the-market_offering" title="At-the-market offering">At-the-market offering</a></li> <li><a href="/wiki/Book_building" title="Book building">Book building</a></li> <li><a href="/wiki/Bookrunner" title="Bookrunner">Bookrunner</a></li> <li><a href="/wiki/Bought_deal" title="Bought deal">Bought deal</a></li> <li><a href="/wiki/Bought_out_deal" title="Bought out deal">Bought out deal</a></li> <li><a href="/wiki/Corporate_spin-off" title="Corporate spin-off">Corporate spin-off</a></li> <li><a href="/wiki/Direct_public_offering" title="Direct public offering">Direct public offering</a></li> <li><a href="/wiki/Equity_carve-out" title="Equity carve-out">Equity carve-out</a></li> <li><a href="/wiki/Follow-on_offering" title="Follow-on offering">Follow-on offering</a></li> <li><a href="/wiki/Greenshoe" title="Greenshoe">Greenshoe</a> <ul><li><a href="/wiki/Reverse_greenshoe" class="mw-redirect" title="Reverse greenshoe">Reverse</a></li></ul></li> <li><a href="/wiki/Initial_public_offering" title="Initial public offering">Initial public offering</a></li> <li><a href="/wiki/Pre-IPO" title="Pre-IPO">Pre-IPO</a></li> <li><a href="/wiki/Private_placement" title="Private placement">Private placement</a></li> <li><a href="/wiki/Public_offering" title="Public offering">Public offering</a></li> <li><a href="/wiki/Rights_issue" title="Rights issue">Rights issue</a></li> <li><a href="/wiki/Seasoned_equity_offering" title="Seasoned equity offering">Seasoned equity offering</a></li> <li><a href="/wiki/Secondary_market_offering" title="Secondary market offering">Secondary market offering</a></li> <li><a href="/wiki/Underwriting" title="Underwriting">Underwriting</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%;line-height:1.3em;"><a href="/wiki/Mergers_and_acquisitions" title="Mergers and acquisitions">Mergers and<br />acquisitions</a></th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Buy_side" title="Buy side">Buy side</a></li> <li><a href="/wiki/Contingent_value_rights" title="Contingent value rights">Contingent value rights</a></li> <li><a href="/wiki/Control_premium" title="Control premium">Control premium</a></li> <li><a href="/wiki/Demerger" title="Demerger">Demerger</a></li> <li><a href="/wiki/Divestment" title="Divestment">Divestment</a></li> <li><a href="/wiki/Drag-along_right" title="Drag-along right">Drag-along right</a></li> <li><a href="/wiki/Management_due_diligence" title="Management due diligence">Management due diligence</a></li> <li><a href="/wiki/Managerial_entrenchment" class="mw-redirect" title="Managerial entrenchment">Managerial entrenchment</a></li> <li><a href="/wiki/Mandatory_offer" title="Mandatory offer">Mandatory offer</a></li> <li><a href="/wiki/Minority_discount" title="Minority discount">Minority discount</a></li> <li><a href="/wiki/Pitch_book" title="Pitch book">Pitch book</a></li> <li><a href="/wiki/Pre-emption_right" title="Pre-emption right">Pre-emption right</a></li> <li><a href="/wiki/Proxy_fight" title="Proxy fight">Proxy fight</a></li> <li><a href="/wiki/Post-merger_integration" title="Post-merger integration">Post-merger integration</a></li> <li><a href="/wiki/Sell_side" title="Sell side">Sell side</a></li> <li><a href="/wiki/Shareholder_rights_plan" title="Shareholder rights plan">Shareholder rights plan</a></li> <li><a href="/wiki/Special-purpose_entity" title="Special-purpose entity">Special-purpose entity</a></li> <li><a href="/wiki/Special_situation" title="Special situation">Special situation</a></li> <li><a href="/wiki/Squeeze-out" title="Squeeze-out">Squeeze-out</a></li> <li><a href="/wiki/Staggered_board_of_directors" class="mw-redirect" title="Staggered board of directors">Staggered board of directors</a></li> <li><a href="/wiki/Stock_swap" title="Stock swap">Stock swap</a></li> <li><a href="/wiki/Super-majority_amendment" class="mw-redirect" title="Super-majority amendment">Super-majority amendment</a></li> <li><a href="/wiki/Corporate_synergy" title="Corporate synergy">Synergy</a></li> <li><a href="/wiki/Tag-along_right" title="Tag-along right">Tag-along right</a></li> <li><a href="/wiki/Takeover" title="Takeover">Takeover</a> <ul><li><a href="/wiki/Reverse_takeover" title="Reverse takeover">Reverse</a></li></ul></li> <li><a href="/wiki/Tender_offer" title="Tender offer">Tender offer</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%;line-height:1.3em;"><a href="/wiki/Leverage_(finance)" title="Leverage (finance)">Leverage</a></th><td class="navbox-list-with-group navbox-list navbox-even" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Debt_restructuring" title="Debt restructuring">Debt restructuring</a></li> <li><a href="/wiki/Debtor-in-possession_financing" title="Debtor-in-possession financing">Debtor-in-possession financing</a></li> <li><a href="/wiki/Dividend_recapitalization" title="Dividend recapitalization">Dividend recapitalization</a></li> <li><a href="/wiki/Financial_sponsor" title="Financial sponsor">Financial sponsor</a></li> <li><a href="/wiki/Leveraged_buyout" title="Leveraged buyout">Leveraged buyout</a></li> <li><a href="/wiki/Leveraged_recapitalization" title="Leveraged recapitalization">Leveraged recapitalization</a></li> <li><a href="/wiki/High-yield_debt" title="High-yield debt">High-yield debt</a></li> <li><a href="/wiki/Private_equity" title="Private equity">Private equity</a></li> <li><a href="/wiki/Project_finance" title="Project finance">Project finance</a></li></ul> </div></td></tr></tbody></table><div></div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%;line-height:1.3em; text-align:left;"><a href="/wiki/Valuation_(finance)" title="Valuation (finance)">Valuation</a></th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Accretion/dilution_analysis" title="Accretion/dilution analysis">Accretion/dilution analysis</a></li> <li><a href="/wiki/Adjusted_present_value" title="Adjusted present value">Adjusted present value</a></li> <li><a href="/wiki/Associate_company" title="Associate company">Associate company</a></li> <li><a href="/wiki/Business_valuation" title="Business valuation">Business valuation</a></li> <li><a href="/wiki/Conglomerate_discount" title="Conglomerate discount">Conglomerate discount</a></li> <li><a href="/wiki/Cost_of_capital" title="Cost of capital">Cost of capital</a> <ul><li><a href="/wiki/Weighted_average_cost_of_capital" title="Weighted average cost of capital">Weighted average</a></li></ul></li> <li><a href="/wiki/Discounted_cash_flow" title="Discounted cash flow">Discounted cash flow</a></li> <li><a href="/wiki/Economic_value_added" title="Economic value added">Economic value added</a></li> <li><a href="/wiki/Enterprise_value" title="Enterprise value">Enterprise value</a></li> <li><a href="/wiki/Fairness_opinion" title="Fairness opinion">Fairness opinion</a></li> <li><a href="/wiki/Financial_modeling" title="Financial modeling">Financial modeling</a></li> <li><a href="/wiki/Free_cash_flow" title="Free cash flow">Free cash flow</a> <ul><li><a href="/wiki/Free_cash_flow_to_equity" title="Free cash flow to equity">Free cash flow to equity</a></li></ul></li> <li><a href="/wiki/Market_value_added" title="Market value added">Market value added</a></li> <li><a href="/wiki/Minority_interest" title="Minority interest">Minority interest</a></li> <li><a href="/wiki/Mismarking" title="Mismarking">Mismarking</a></li> <li><a href="/wiki/Modigliani%E2%80%93Miller_theorem" title="Modigliani–Miller theorem">Modigliani–Miller theorem</a></li> <li><a href="/wiki/Net_present_value" title="Net present value">Net present value</a></li> <li><a href="/wiki/Pure_play#Pure_play_method" title="Pure play">Pure play</a></li> <li><a href="/wiki/Real_options_valuation" title="Real options valuation">Real options</a></li> <li><a href="/wiki/Residual_income_valuation" title="Residual income valuation">Residual income</a></li> <li><a href="/wiki/Stock_valuation" title="Stock valuation">Stock valuation</a></li> <li><a href="/wiki/Sum-of-the-parts_analysis" title="Sum-of-the-parts analysis">Sum-of-the-parts analysis</a></li> <li><a href="/wiki/Tax_shield" title="Tax shield">Tax shield</a></li> <li><a href="/wiki/Terminal_value_(finance)" title="Terminal value (finance)">Terminal value</a></li> <li><a href="/wiki/Valuation_using_multiples" title="Valuation using multiples">Valuation using multiples</a></li></ul> </div></td></tr><tr><td class="navbox-abovebelow" colspan="2"><div> <ul><li><span class="noviewer" typeof="mw:File"><span title="List-Class article"><img alt="" src="//upload.wikimedia.org/wikipedia/en/thumb/d/db/Symbol_list_class.svg/16px-Symbol_list_class.svg.png" decoding="async" width="16" height="16" class="mw-file-element" srcset="//upload.wikimedia.org/wikipedia/en/thumb/d/db/Symbol_list_class.svg/23px-Symbol_list_class.svg.png 1.5x, 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