Parity Price
Candlefocus EditorParity prices are frequently employed when pricing convertible bonds. Convertible bonds are those types of bonds that can be converted into shares of a company’s common stock. Parity is the price point at which investors become profitable if they choose to convert their bonds into stock. This point can be used as a gauge for investors when making decisions about whether or not to convert their bonds.
In addition to convertible bonds, parity prices are also used in currency. When comparing the value of two currencies, parity prices are the level at which it would be equal to exchange one currency for the other. This is usually done between countries with distinct economic ties.
Overall, parity is an important phenomenon that is critical to understanding the flow of money in the markets. It can help investors determine when to buy and sell convertible bonds, as well as compare the values of two different currencies. Parity prices are a key component of understanding near markets, as well as the global economy.