Convertible Bond Calculator
This tool helps investors and issuers analyze convertible securities by separating the straight-bond component from the equity conversion component and by estimating conversion outcomes for convertible notes using common contract provisions (discount and valuation cap). It is intended for fast scenario analysis and to highlight key sensitivities.
Models use standard present-value formulas for the bond floor and algebraic conversion formulas for notes. Results are approximations that depend on your inputs and on assumptions about coupon timing and compounding. Use the provided outputs to cross-check legal documents and to support further due diligence.
Separates a convertible bond into its straight bond (bond floor) and conversion/equity component given market inputs. Useful for investors comparing bond-floor value to market price and for estimating premium/discount to conversion value.
Inputs
Results
Straight bond (floor) value
-$7,295.00
Conversion value (equity component)
$1,000.00
Premium/Discount to conversion (%)
500.00%
Conversion ratio (shares per bond)
25
| Output | Value | Unit |
|---|---|---|
| Straight bond (floor) value | -$7,295.00 | USD |
| Conversion value (equity component) | $1,000.00 | USD |
| Premium/Discount to conversion (%) | 500.00% | % |
| Conversion ratio (shares per bond) | 25 | — |
Visualization
Methodology
Bond-floor decomposition: we compute present value of an annual coupon stream plus discounted principal at an entered market discount rate to obtain the straight-bond value. The difference between market price and straight-bond value reflects the market value attributed to the conversion/equity option.
Conversion calculations for notes: discounts are applied to the qualified round price to derive a conversion price. A valuation cap implies an alternate conversion price when expressed as cap valuation divided by pre-money shares. The calculator reports both outcomes so the user can apply contract rules or administrative waterfall logic.
Design and governance: the tool documents inputs and formulas. For model risk management follow relevant guidance such as ISO 31000 for risk management, IEEE guidance for technical processes, and NIST publications for controls around data integrity and reproducibility.
Expert Q&A
Which discount rate should I use for the straight-bond floor?
Choose a market-consistent discount rate that reflects the issuer's credit risk and comparable traded bonds. The floor is sensitive to this rate; small changes can materially affect decomposition. Document your rate choice and compare results across plausible ranges.
When should I use the cap versus the discount for note conversion?
Contract language specifies which provision governs (cap, discount, or best-of). This calculator reports both conversions: cap-derived and discount-derived outcomes. Apply the actual legal rule to determine the correct conversion in any transaction.
Are results precise valuations I can use for regulatory filings?
No. Outputs are model estimates for analysis and scenario planning. For regulatory or accounting purposes, use full valuation models, audited inputs, and follow IFRS/US GAAP guidance where applicable. Maintain documentation and controls as recommended by ISO 31000 and NIST.
How do rounding and compounding assumptions affect results?
This tool assumes annual coupon payments and annual discounting by default. If coupons are semiannual or daily compounding is required, adjust inputs or use a specialized model. Rounding can affect share counts for conversion; legal documents typically specify rounding rules, which should be applied downstream.
Sources & citations
- NIST — Frameworks and guidance — https://www.nist.gov
- ISO 31000 — Risk management — https://www.iso.org/iso-31000-risk-management.html
- IEEE Standards Association — standards overview — https://standards.ieee.org
- U.S. Securities and Exchange Commission — https://www.sec.gov
- Occupational Safety and Health Administration (governance reference) — https://www.osha.gov