# Convertible Bond

*Markets & Instruments — Finicade finance glossary*

A convertible bond is corporate debt that the holder can swap for a fixed number of shares, making it a bond with an embedded call option on the equity. The investor accepts a lower coupon for that upside; the issuer gets cheap financing today at the cost of dilution later. Convertibles behave like bonds when the share price is low and like equity when it's high, and the transition zone between the two is where convertible arbitrage funds operate.

**Also known as:** convertibles, CB

**Related terms:** [Bond](https://finicade.com/glossary/bond), [Option](https://finicade.com/glossary/option), [Preferred Stock](https://finicade.com/glossary/preferred-stock), [Dilution](https://finicade.com/glossary/dilution), [Callable Bond](https://finicade.com/glossary/callable-bond)

Source: https://finicade.com/glossary/convertible-bond