Glossary

Common stock: Common stock, as the name implies, is the stock commonly traded on stock exchanges.

Conversion premium: The difference between the price of the convertible and the conversion value, expressed as a percentage of the conversion value.

Conversion price: The price a common stock would have to reach to make it profitable to convert a convertible into the common stock.

Conversion ratio: Number of units of common stock the convertible can be converted into, based on its face value.

Conversion value: The conversion ratio multiplied by the price of the security the convertible can be converted into.

Convertible debentures: Another name for convertible bonds.

Convertible security: Corporate bonds or preferred stocks that can be converted to common stock under certain conditions.

Hedge fund: A hedge fund pools investments like a mutual fund, but accepts a limited number of investors who co-own the fund as limited partners. Each hedge fund follows a set investment strategy, but fund managers are not bound by regulations to stay within the strategy and have the freedom to adjust to market changes and opportunities.

Hedge funds also may use a variety of hedging strategies, such as arbitrage, short-selling and other sophisticated techniques. Sometimes these techniques add risk, but they can also help fund managers control risk, boost returns and take advantage of market conditions.

Investment value: Estimated value of a convertible if it lacked the option to convert.

Mandatory Convertible Preferred Stock (MCPS): Preferred stock that must be converted to common stock when the price of common stock reaches a certain level.

Preferred stock: Preferred stocks are called that because they have the first right to any money the corporation has for paying dividends. The dividend of a preferred stock is more secure than the dividend of a common stock. It is also usually fixed, so it is similar to a bond, which is also known as a "fixed-income" security.

Real estate investment trust (REIT): REITs are trusts that enable investors to pool their capital to invest in real estate with limited liability.