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Finance Dictionary and Glossary of Investment Terms
Bond, preferred stock, or debenture that is exchangeable at the option of the holder for common stock of the issuing corporation.
A security that can be converted into some other kind of security. Typically this means a species of bond that can be converted into common stock at a given price at the option of the holder, who would make the conversion if the common shares rise above this price. Convertibles are attractive to investors who want the dividend and added security of a bond, but the chance to cash in on some stock gains as well. Convertibles are often issued by fast-growing companies. The difficulty of pricing convertibles leads some investors who like convertibles to invest in them via mutual funds.