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The simultaneous purchase of convertible bonds and the short sale of the same issuer's common stock is a hedge fund strategy known as convertible arbitrage. The motivation for such a strategy is that the equity option embedded in a convertible bond is a source of cheap volatility , which can be exploited by convertible arbitrageurs.
A convertible security is a financial instrument whose holder has the right to convert it into another security of the same issuer. Most convertible securities are convertible bonds or preferred stocks that pay regular interest and can be converted into shares of the issuer's common stock.
Seniority can refer to either debt or preferred stock. Senior debt must be repaid before subordinated (or junior) debt is repaid. [1] Each security, either debt or equity, that a company issues has a specific seniority or ranking. Bonds that have the same seniority in a company's capital structure are described as being pari passu.
The underlying stock, index or basket of equities is defined as Reference Shares. In most cases, Reverse convertibles are linked to a single stock. There are also inverse reverse convertibles, which are the opposite of a reverse convertible. The owner benefits as long the underlying stock does not go above a predetermined barrier.
Common stock. Common stock isn’t just common in name only; this type of stock is the one investors buy most often. It grants shareholders ownership rights, allows them to vote on important ...
Annaly Capital Management, Inc. Announces Conversion Rate Adjustment for 4.00% Convertible Senior Notes Due 2015 NEW YORK--(BUSINESS WIRE)-- Annaly Capital Management, Inc. (NYSE: NLY) ("Annaly ...
Equity value can be calculated in two ways, either the intrinsic value method, or the fair market value method. The intrinsic value method is calculated as follows: Equity Value = Market capitalization + Amount that in-the-money stock options are in the money + Value of equity issued from in-the-money convertible securities - Proceeds from the conversion of convertible securities
Take-Two Interactive is looking to expand its capital base by $250 million. This comes in the form of an issue of five-year convertible senior notes in an underwritten public flotation.