Convertible Arbitrage

 

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Convertible Arbitrage

In 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 Matches

Convertible currency

Convertible currency

A currency that can legally be exchanged for another or for gold. In times of crisis, governments sometimes restrict such exchange, giving rise to black market exchange rates.


Cash plus convertible

Cash plus convertible

Convertible bond that requires cash payment upon conversion.


Zero coupon convertible security

Zero coupon convertible security

A zero-coupon bond convertible into the common stock of the issuing company after the stock reaches a certain price, using a put option inherent in the security. Also refers to zero-coupon bonds, which are convertible into an interest bearing bond at a certain time before maturity.


Convertible

Convertible

Convertibles 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 insurance

Convertible term insurance

Term 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.


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