# Talk:Convertible bonds

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Feel free to develope this page Blbarnitz 23:51, 11 January 2009 (UTC)

Is the Conversion Value shown in Figure 1 the same as the Conversion price? The terminology is unclear. If so, can the conversion price (value?) example be modified to match the figure? --LadyGeek 12:56, 24 August 2013 (CDT)

Here are the inputs used in the graphic depiction (the image is available from google images}:
Here is the page link for the image: Calamos Investments - Convertible Bond Example

"To help clarify some of these concepts, we present a hypothetical example in the table below and graphically in Figure 2-6. Assume that a new issue convertible has come to market. It has a 5 percent coupon and 10 years to maturity. The issuing company has other 10 year debt that carries an 8 percent yield, and the company's stock is currently trading at \$42.

XYZ Company Convertible Bond
Coupon 5%
Maturity 10 years
Straight bond yield to maturity 8%
Conversion price \$50/share
Current stock price \$42/share
Conversion ratio 20 shares per bond
I jiggered the numbers in the text to more closely match the figure.
Also note that this model is a simplification, that professionals use the full gamut of greeky math (delta, gamma, rho, theta, and vega) to value convertible bonds and the academics utilize differential equation calculus ,--Blbarnitz 16:19, 24 August 2013 (CDT)

I utilized Calamos Investments - Convertible Bond Example to clarify that conversion value is described in Figure 1. "To calculate the current conversion value, we know that the stock price is currently \$42. Multiplying \$42 by 20 shares, we get a current conversion value of \$840."

Under credit risk, I think the tables indicate that many convertible bonds (versus "most") are not investment grade bonds. I considered both indexes. This is a qualitative judgment, but I wanted to explain.

• Credit risk: ...Most convertible bonds are not investment grade bonds. [note 1]
1. Convertible bond credit quality (as of August 22, 2013)

Barclays U.S. Convertible Bond <p>> \$500MM Index Credit quality Barclays Intermediate <p> US Corporate Index Credit quality
A 11.12% Aaa 0.59%
Baa 28.40% Aa 10.34%
Below Baa 31.88% A 48.74%
Not rated 28.60% Baa 40.33%
<p> Data sources : SPDR® Barclays Convertible Securities ETF, holdings tab; SPDR® Barclays Intermediate Term Corporate Bond ETF, holdings tab. </span>

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--LadyGeek 16:56, 26 August 2013 (CDT)