Introduction to Convertible Bonds

Introduction to Convertible Bonds

James Eves

30 years: Equity capital markets

James provides an overview of convertible bonds in this video. He begins by outlining their structure before discussing both the advantages and disadvantages of using them.

James provides an overview of convertible bonds in this video. He begins by outlining their structure before discussing both the advantages and disadvantages of using them.

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Introduction to Convertible Bonds

16 mins 13 secs

Overview

The convertible or 'equity linked' market is one of the most varied in terms of structures – from bonds that convert in shares at maturity, through to ones with conversion premiums as high as 70%. Convertible bonds have been used for decades but it was not until the development of option pricing models starting with Black and Scholes in 1973 that trading liquidity and the investor base really grew.

Key learning objectives:

  • Outline the structure of convertibles

  • Comprehend how volatility, options, and dividends are looked at by investors

  • Understand the advantages and disadvantages of convertibles and who invests in them

  • Learn about the different types of options and the delta of convertibles compared to the share price

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Summary
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