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A reverse convertible security is a type of convertible security where a bond or short-term note can be converted to cash, debt or equity at a set date by the issuer based on an underlying stock. In effect it is a type of option on the maturity date where the bond can be converted to shares or cash.
Convertible bond; Reverse convertible bond; Convertible preferred stock; Asset-linked bond: Although a bond with an asset warrant is a type of convertible security, regular warrants are not. A regular warrant provides an equity option, where the holder may opt to buy newly issued shares at a determined exercise price and date.
Fully Callable Bonds. Can be called at any time after the call date if applicable. Common among corporate bonds. Partially Callable Bonds. Only a portion of the bond can be called, not the full amount
If rates go down, many home owners will refinance at a lower rate. As a consequence, the agencies lose assets. By issuing numerous callable bonds, they have a natural hedge, as they can then call their own issues and refinance at a lower rate. The price behaviour of a callable bond is the opposite of that of puttable bond.
A debate has emerged online (based on this article in The Wall Street Journal) about the financial the instrument known as a reverse convertible bond. A regular convertible bond pays the owner ...
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In finance, a convertible bond, convertible note, or convertible debt (or a convertible debenture if it has a maturity of greater than 10 years) is a type of bond that the holder can convert into a specified number of shares of common stock in the issuing company or cash of equal value.
Securities other than bonds that may have embedded options include senior equity, convertible preferred stock and exchangeable preferred stock. See Convertible security. [citation needed] The valuation of these securities couples bond-or equity-valuation, as appropriate, with option pricing. For bonds here, there are two main approaches, as ...