Calculate convertible security parity price, conversion value, premium, ratio, market conversion price, and soft call trigger from key inputs.

Use the market dollar price for one convertible security, not a percentage-of-par quote.

Conversion Parity Price Formula

The following formula is used to calculate a conversion parity price.

CPP = VCS / CR
  • Where CPP is the conversion parity price ($)
  • VCS is the market dollar price of one convertible security ($)
  • CR is the conversion ratio

To calculate the conversion parity price, divide the value of the convertible security by the conversion ratio.

What is a conversion parity price?

Definition:

Conversion parity price, also called market conversion price, is the market price of a convertible security divided by the shares received on conversion. It is the stock price at which those shares equal the security’s market price, before accrued interest, fees, taxes or contractual adjustments. It differs from the contractual conversion price based on par value.

How to calculate conversion parity price?

Example Problem:

The following example outlines how to calculate a conversion parity price.

First, determine the value of the convertible security. In this example, the security is valued at $10,000.00.

Next, determine the number of shares that would be issued if the convertible security was converted. This is also known as the conversion ratio. For this example, the number of shares that would be issued is 200.

Finally, calculate the parity price at which the conversion value equals the security’s market price, excluding costs and other adjustments.

CPP = VCS / CR

CPP = $10,000.00 / 200

CPP = $50.00 per share