Convertible Bonds: Valuation
Interactive

Convertible Bonds: Valuation

Intuition Publishing
Updated Sep 24, 2020

A convertible bond is essentially two securities, a straight bond and an embedded call option. Here we focus on the straight bond element in convertible bond valuation. We discuss the lower bound for a convertible's conversion value, and explore the reasons why a convertible trades at a premium to its lower bound value. To conclude, we identify the four pricing phases of a convertible bond.