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 by the conversion ratio, which is the number of shares a convertible security can be converted into.

For example, a convertible bond with a par value of $1,000 and can be exchanged for 20 shares of common stock. The conversion parity price would be $50 ($1,000/20 shares). Investors can limit risk by purchasing a convertible security when the conversion parity price is close to the market price for the common stock, and the price of the common stock is expected to rise in the future.


Investment dictionary. . 2012.

Look at other dictionaries:

  • 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

  • Parity Price — When the price of an asset is directly linked to another price. Examples of parity price are: 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… …   Investment dictionary

  • conversion parity/value — Applies mainly to convertible securities ( convertible security). common stock price at which a convertible bond can become exchangeable for common shares of equal value; value of a convertible bond based solely on the market value of the… …   Financial and business terms

  • conversion parity — See: market conversion price …   Financial and business terms

  • parity price — (1) For a mortgage backed security, see par line. (2) For a convertible security, see conversion value. American Banker Glossary …   Financial and business terms

  • parity — For convertibles, level at which a convertible security s market price equals the aggregate value of the underlying common stock; value/worth of the convertible bond considered only as an equity instrument ( conversion ratio times common price).… …   Financial and business terms

  • conversion ratio — The specified number of shares of common stock that will be received for each convertible bond or share of convertible preferred stock at the time of conversion. This ratio is specified at issuance in the bond indenture agreement. This is often… …   Financial and business terms

  • conversion — The sale of a cash position and investment of part of the proceeds in the margin for a long futures position. The remaining money is placed in an interest bearing instrument. This practice allows the investor/dealer to receive high rates of… …   Financial and business terms

  • Market conversion price — Also called conversion parity price, the price that an investor effectively pays for common stock by purchasing a convertible security and then exercising the conversion option. This price is equal to the market price of the convertible security… …   Financial and business terms

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