Description
Multiply ratio by share price for conversion parity and subtract from bond price.
A financial model connects supplied rates, discount factors, cashflows or prices under a particular convention. A local identity or residual is not a complete valuation, an observed market relationship or a promise of future returns.
Multiply ratio by share price for conversion parity and subtract from bond price.
When to use this tool
Use Convertible Bond Parity Gap when you need one transparent financial-model term.
How to use the tool and how it works
- Enter bondPrice, conversionRatio, sharePrice. Use the units and conventions below.
- Run the tool. Correct any format, range, or cross-field input error before interpreting the output.
- Read parity, gap. Use the output convention below.
Require nonnegative bond price, conversion ratio and share price. Multiply ratio by share price for conversion parity and subtract from bond price.1
| Input field | Meaning and units | Accepted input |
|---|---|---|
| bondPrice | Bond Price | Required. Finite number; minimum 0. |
| conversionRatio | Conversion Ratio | Required. Finite number; minimum 0. |
| sharePrice | Share Price | Required. Finite number; minimum 0. |
| Output field | Interpretation | Returned shape |
|---|---|---|
| parity | Parity | Required. Finite number. |
| gap | Difference on the stated unit and subtraction basis. | Required. Finite number. |
{
"input": {
"bondPrice": 1050,
"conversionRatio": 20,
"sharePrice": 50
},
"output": {
"parity": 1000,
"gap": 50
}
}Limitations and assumptions
- Ratio is shares per bond on the same currency/value basis. This gap does not price the embedded option, assess credit risk or determine actual conversion rights.
- Inputs must satisfy both the field types and the cross-field conditions above. Invalid input causes an error; a successful false flag or documented placeholder is a different result.
- Numeric calculations use binary floating point unless exact decimal-integer arithmetic is explicitly stated. No hidden measurement tolerance or decimal rounding is added; nonfinite or out-of-contract results are rejected. Numeric signed-zero results are exported as zero.
Alternative or Complementary methods
Use a complete model matching the instrument, cashflows and market conventions. Review compounding, timing, currency, uncertainty and omitted costs before using a local estimate in a financial decision.
References
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