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Convertible Bonds

Definition of Convertible Bonds

A convertible bond is a hybrid security that’s initially designed to be a debt instrument that pays a fixed interest rate in exchange for a loan. Once the loan’s tenure ends, the holder can decide to take one of either action:

  • Don’t convert bond: face value of the bond is transferred to the holder on maturity
  • Related Terms

    Bottom Line in Finance

    Bottom line in finance is used to refer to a company’s crucial metrics like earnings, profits, net profits, earnings per share (EPS), and others.

    Any move or action that can impact a company’s profit or net profit in a positive or negative direction is also referred to as the bottom line.

    “Bottom line” is called such because the crucial metrics of a company are generally found at the bottom of a financial statement.

    Equities

    The term equities can be used to describe two different things. First, equities refers to stocks held by shareholders. Equities of this type represent residual ownership or stake in a company.

    Second, equities are the amount of money shareholders shall receive in the event that a company is liquidated. In such a case, the equities will be calculated by subtracting the total debt from total assets.

    Gravestone Doji

    A Gravestone Doji is a candlestick pattern that signals the reversal of a bullish trend into a bearish one. The key marker of a Gravestone Doji pattern is the open, low, and closing prices being near to one another.

    This is a price action type trading strategy that is formed with a tall upper shadow, which is a signal of a bearish reversal.

    Foreign Portfolio Investment

    A Foreign Portfolio Investment includes stocks, bonds, ETFs, derivatives, and other financial instruments from another country. Generally, FPIs do not give an investor the right to ownership or a controlling stake in any organization. Instead, FPIs act as a passive income vehicle. That’s why FPIs are different to Foreign Direct Investment (FDI) in which an ownership stake is acquired with the intention of controlling and influencing business decisions.

    European Option

    A European Option allows a trader to exercise the contract only on the day of expiry. For example, let’s say an options trader bought a European Call Option that expires on 01-01-2023.

    The options trader can only exercise the call option, that is, buy the underlying assets on the day of expiry which is 01-01-2023. In India, traders can only engage in European options.

    Indices

    Indices are a collection of financial instruments that measure the performance of those very instruments.

    For example, stock market indices like Nifty 50 and Sensex measure the top 50 and 30 stocks by market capitalization.

    If indices go up, it generally means that the underlying stocks are performing well. The opposite is true when indices plummet.

    By the way, there’s no limit to how many instruments an index can track. The Nifty Smallcap 250 tracks 250 stocks whereas Nifty Bank tracks 12 stocks.



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