What is Conversion Parity Price ?
Conversion Parity Price (CPP) is a crucial concept in finance and economics, especially in the context of convertible securities. It refers to the price at which the convertible security (such as a convertible bond or preferred stock) is equal in value to the underlying common stock into which it can be converted. In simpler terms, it's the point at which it becomes financially neutral to convert the security into shares of stock, as opposed to holding onto it as a fixed-income instrument. The calculation of Conversion Parity Price involves considering various factors such as the market price of the common stock, the conversion ratio (the number of shares the convertible security can be exchanged for), and any dividends or interest payments associated with the security.
How to Calculate Conversion Parity Price?
Conversion Parity Price calculator uses Conversion Parity Price = Value of Convertible Security/Conversion Ratio to calculate the Conversion Parity Price, The Conversion Parity Price equalizes prices between assets or instruments via arbitrage or market forces, eradicating price differentials. Conversion Parity Price is denoted by CPP symbol.
How to calculate Conversion Parity Price using this online calculator? To use this online calculator for Conversion Parity Price, enter Value of Convertible Security (V_{cs}) & Conversion Ratio (CR) and hit the calculate button. Here is how the Conversion Parity Price calculation can be explained with given input values -> 48.78049 = 1000/20.5.