Traditional Hybrids
Traditional hybrids were usually structured in a way that leads the securities to react to the underlying share price. Although each has individual characteristics, typically:
- they have a set dividend until conversion
- the conversion might occur at a number of dates
- they are usually issued at a similar price to the underlying share
- they convert at a set ratio. e.g. 1 hybrid converts into 1 underlying share
Note: This fixed conversion ratio means the price of these hybrids react to the movement in the underlying share price. (The extent of the co-relation is sometimes referred to as a delta, and these typically have a delta of between 0.5 and 1) In addition, some of these securities include minimum and maximum conversion terms, effectively giving the holder a put and call option if the share price reaches a certain prices.
Read more about this topic: Hybrid Security
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