What is "convertible security"

n. (context finance English) A security that can be converted into another security.

n. a corporate security (usually bonds or preferred stock) that can be exchanged for another form of security (usually common stock) [syn: convertible]

A convertible security is a security that can be converted into another security. Convertible securities may be convertible bonds or preferred stocks that pay regular interest and can be converted into shares of common stock (sometimes conditioned on the stock price appreciating to a predetermined level). Warrants are equity convertible securities. They give the owner the option to buy newly issued shares at a determined exercise price and date. Equity capital notes are similar to warrants, except that there is no exercise price.