Investing in convertibles, preferred stocks, and warrants

Krishnamurti, Chandrasekhar and Vishwanath, S. R. (2009) Investing in convertibles, preferred stocks, and warrants. In: Investment management: a modern guide to security analysis and stock selection. Springer-Verlag, Berlin / Heidelberg, Germany, pp. 405-438. ISBN 978-3-540-88801-7

Abstract

[Chapter Introduction and Objectives]: Convertibles are derivative embedded, hybrid instruments that get converted into the issuer's equity after some time at the option of the holder. The worldwide market for convertibles has grown enormously. In this chapter, we discuss the rationale for and the valuation of convertibles. We also compare convertibles with debt-warrant packages and preferred stocks. This chapter has the following objectives: • Highlight the factors responsible for the growth in convertible issuance • Discuss the design and valuation of convertible bonds • Introduce stock warrants and preferred stocks A convertible bond, as opposed to a straight bond, gets converted into a fixed number of shares of the issuing company at a pre-specified price. The holder of a convert is entitled to receive interest on the convertible portion till conversion. Thus, a convert is a package of straight debt and equity option. The option to convert is usually at the discretion of the holder and will only be exercised when and if the holder finds such an exercise desirable. The features (terminology) of a convertible bond are discussed below.


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Item Type: Book Chapter (Commonwealth Reporting Category B)
Refereed: No
Item Status: Live Archive
Additional Information: Chapter 17. Author's version not available. Print copy held in USQ Library at call no. 332.6 Inv.
Depositing User: Professor Chandrasekhar Krishnamurti
Faculty / Department / School: Historic - Faculty of Business - School of Accounting, Economics and Finance
Date Deposited: 24 Mar 2010 10:09
Last Modified: 20 Feb 2012 05:01
Uncontrolled Keywords: market investing; investments; convertibles; preferred stocks; warrants
Fields of Research (FOR2008): 15 Commerce, Management, Tourism and Services > 1502 Banking, Finance and Investment > 150201 Finance
Identification Number or DOI: doi: 10.1007/978-3-540-88802-4
URI: http://eprints.usq.edu.au/id/eprint/6721

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