AGC - Illogical Pricing In Convertible CEFs
Author's note: Data from the article are current as of March 7, 2018.
What are convertible bonds?
A convertible security is a hybrid instrument of a bond (or preferred stock) and the underlying stock of the issuer. Convertible bonds pay out regular fixed coupon payments and a principal repayment on maturity with an additional option to convert to equity, contingent on specific future events.
A convertible bond generally behaves like a corporate bond with a call option on the underlying equity. Because of the call option, convertible bonds generally yield less than an equivalent