The quoted price of a convertible bond which is normally expressed as a percentage of the bond’s nominal value (par value). For example, the price of a convertible might be 90% of its par value. Therefore, if the par value of this bond is $1,000, then its price will be $900. The convertible price will move down with the price of its underlying stock until it reaches its straight bond value. At this level, the convertible starts behaving like a standard bond and faithfully reflects changes in interest rates, and it will not be affected by any further decline in the price of the stock. In the opposite case, the convertible price will move up with the price of its underlying until starts to act like its stock and the difference between parity and the convertible price narrows.
Finance
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