Convertible Debenture Valuation Tool

A convertible is a bond wearing a call option. Value each piece separately, and the premium investors are actually paying for the conversion right becomes obvious.

Reading This Tool

How To Use This Calculator

Enter the bond terms, the conversion price, and the current stock price and volatility.

The straight bond value is a standard present value calculation using a comparable non-convertible yield. The conversion right on top is priced the same way any call option is priced, using Black-Scholes, then scaled by however many shares each bond converts into.

Your Inputs

Face Value Per Debenture $1,000

Coupon Rate 5.0%

Years To Maturity 5 yrs

Comparable Straight Bond Yield 7.0%

Conversion Price $25.00

Current Stock Price $20.00

Stock Volatility 35%

Uses the comparable straight bond yield as the risk-free proxy in the option pricing leg, a common simplification. Real convertible pricing desks typically use a more elaborate model accounting for credit risk separately in each leg.

Convertible Value

Total Estimated Convertible Value

Straight Bond Value

Embedded Conversion Option Value

Shares Per Debenture

Value Split: Bond Floor vs. Conversion Option

Straight Bond Value Option Value

Ignores call provisions, put provisions, and any credit spread specific to the issuer beyond what's embedded in the comparable yield entered. Real convertible securities frequently include call protection periods and other features that materially affect value.

Pricing a straightforward option instead?

Use The Black-Scholes Engine →