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Convertible Arbitrage |
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Convertible ArbitrageIn the context of hedge funds, a style of management that involves the simultaneous purchase of a convertible bond and the short sale of shares of the underlying stock. Interest rate risk may or may not be hedged.Convertible Arbitrage Similar MatchesConvertible priceConvertible priceThe contractually specified price per share at which a convertible security can be converted into shares of common stock. High premium convertible debentureHigh premium convertible debentureA bond with a long-term, high-premium, common stock conversion feature. It also offers a competitive interest rate. This type of investment vehicle is aimed at bond investors who want to be able to convert into stock to hedge against inflation. ConvertibleConvertibleConvertibles are bonds issued by companies which can be converted into ordinary shares or preference shares at a given price at a future date. For example a convertible might pay 6% in income, and give the holder the right to 5 ordinary shares for every £20 of bond value.They are a popular means of raising capital when interest rates are high, because the interest which the company has to pay on them is lower than on an unconvertible bond (the option to convert is deemed to be worth something to the holder).From an investor's point of view, convertible bonds can be attractive if the company's stock is volatile because they provide some of the security of a bond whilst at the same time allowing the investor to convert to shares if the company's stock rises. Convertible term insuranceConvertible term insuranceTerm life insurance which can be converted into cash value insurance. In the UK the equivalent (convertible term assurance) is conversion of term assurance into endowment assurance. Convertible bondConvertible bondGeneral debt obligation of a corporation that can be exchanged for a set number of common shares of the issuing corporation at a prestated conversion price. Further SuggestionsConvertible preferred stockZero coupon convertible security Convertible currency Cash plus convertible Convertible 100 Convertible security Convertible eurobond convertible bond Mandatory convertibles |
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