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Question
I have a question I hope you can help me with. It is concerning corporate bonds.
What is the difference between a convertible and an exchangable bond, if any?
A convertible bond can be converted or "exchanged" for common stock of the issuer at the OPTION of the holder.
An exchangeable bond can be "converted" at the option of the holder to common stock of a firm OTHER THAN the issuer.
So they are the same but differ as to the stock conversion option.
Examples:
IBM issues bonds where $100,000 are convertible to 1000 shares of IBM stock.
IBM issues bonds where $100,000 are exchangeable for 1200 shares of Microsoft.
Hope this helps...
Doug Ingram
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Doug Ingram
Expertise
Fixed income portfolio allocation and strategies for institutional investors. Having designed multi-scenario risk quantification and cash flow projection models for nearly 25 years, Strategic Technical Initiatives can answer your regulatory, SFAS 115 allocation, securities selection, and other questions dealing with yield curve placement and portfolio mix strategies. I write the Bond Market Review on behalf of Commerce Street Capital Management.
Experience
Trading and designing portfolio strategies since 1980.
Education/Credentials
Physics and Differential Mathematics
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