1. Convertibles - the price at which a convertible security equals the value of the underlying stock.
2. Options - when an option is trading at its intrinsic value ("trading at parity").
3. International parity - official rates for a currency in terms of other pegged currencies, typically the U.S. dollar.
Parity price is commonly used in the context of convertible securities and often referred to as "conversion parity price" or "market conversion price". It is the price an investor effectively pays to exchange or convert a convertible security into common stock and is equal to the price of the convertible security divided by the conversion ratio (the number of shares that the convertible can be converted into). Conversely, in the case of common stock, it is calculated by dividing market value by the conversion ratio.
In agricultural commodities, you can think of parity price as the purchasing power of a particular commodity relative to a farmer's expenses such as wages, interest on debt, equipment, taxes and so forth. The Agricultural Adjustment Act of 1938 states that the parity price formula is "average prices received by farmers for agricultural commodities during the last 10 years and is designed to gradually adjust relative parity prices of specific commodities". If the parity price for a commodity is not sufficient enough for a farm operator to support his or her family and operate the business then the government could step in and support prices through direct purchases, or the issuance of non-recourse loans to farmers.
Investment dictionary. Academic. 2012.
Look at other dictionaries:
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Conversion Parity Price — The price paid for a share of stock purchased by exercising the option on a convertible security. The conversion parity price is the effective price paid by the investor, and is calculated by dividing the market price of the convertible security… … Investment dictionary
Conversion parity price — Related:Market conversion price Conversion premium The percentage by which the conversion price in a convertible security exceeds the prevailing common stock price at the time the convertible security is issued. The New York Times Financial… … Financial and business terms
conversion parity price — Related: market conversion price … Financial and business terms
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price — The cost at which something is obtained. Something which one ordinarily accepts voluntarily in exchange for something else. The consideration given for the purchase of a thing. Amount which a prospective seller indicates as the sum for which he… … Black's law dictionary
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