convertible bond
- A type of bond that can be swapped for a different security, like common stock, under predetermined conditions
- If the price of the company's stock increases, the convertible bond offers investors the chance to benefit.
- The company issued a convertible bond as a way to raise capital without immediately diluting the shareholders' value.
- Holders of a convertible bond are protected from downside risk, yet can also participate in the upward potential of the underlying company's equity.
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