Beruflich Dokumente
Kultur Dokumente
PRESENTED BY ,
G.Harshini
Janupriya
S.Anukarthika
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Convertible bond
A convertible bondorconvertiblenote
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Call provisions
Call provisions
Convertible valuation as a stock plus method
Think stock with higher yield
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bearish hedge
High loss when the stock price moves up
sharply
Convertible asset swap
Synthetically separates the fixed income
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money
Most companies force conversion
What happens if parity falls below the call
price?
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Convertible Bonds
A derivative product
Standard Corporate bond with an option
Sensitive to interest rate & volatility of
underlying equity
Worth of CB
- At the minimum of non- convertible bonds
- Coupon on CB is higher than dividend on
shares
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current price
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Conversion parity
Relationship between (stock price *conversion factor)
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Conversion Premium
Usually CBs are bought at higher price than
conversion value
underlying asset
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Types of CB
Callable CB
Allows the issuer to buy back the bond
Puttable CB
Investor can sell to issuer; put option raises the
value of CB
Resettable CB
Conversion ratio can be reset based on average
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