What is convertible bond?Convertible Bond

A bond that can be swapped for company shares at an agreed conversion price: bond-like when the stock is low, with principal and interest as a floor, and stock-like when it's high.

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Arbitrage Strategies
Convertible Bond Conversion Arbitrage
A convertible bond can be swapped for stock at an agreed price. When the stock jumps and the convertible lags, buy the convertible, convert, and sell the stock to pocket the gap, as long as you lock away the overnight risk.

Related terms

borrowing shares
conversion price
conversion value
conversion premium
bond floor

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