Convertible Security

A convertible security is a kind of investment that can be changed into another form. When compared to investment options that do not feature a conversion element, convertible securities typically have a lower payout. The value of the conversion feature of this security is close to the value of a stock’s call option. The performance of convertible securities can be heavily influenced by the underlying stock's price. Companies that issue securities will often use call features to maintain some control of the investment.