| Convertible Bond | |
 A bond that can be converted into a predetermined amount of the company's equity at certain times during its life, usually at the discretion of the bondholder. Convertibles are sometimes called "CVs". |
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 Issuing convertible bonds is one way for a company to minimize negative investor interpretation of its corporate actions. For example, if an already public company chooses to issue stock, the market usually interprets this as a sign that the company's share price is somewhat overvalued. To avoid this negative impression, the company may choose to issue convertible bonds, which bondholders will likely convert to equity anyway should the company continue to do well. From the investor's perspective, a convertible bond has a value-added component built into it; it is essentially a bond with a stock option hidden inside. Thus, it tends to offer a lower rate of return in exchange for the value of the option to trade the bond into stock. |
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 Convertible Bonds: An Introduction - Find out about the nuts and bolts, pros and cons of these securities. Bond Basics Tutorial - What are bonds and do they belong in your portfolio? Get all the answers in this comprehensive tutorial. Advanced Bond Concepts - This detailed tutorial explains some of the more complex concepts and calculations you need to know for trading bonds, including bond pricing, yield, term structure of interest rates, duration, and much more. |
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