This glossary term discusses the convertible bonds used by reporting companies or other established businesses, which should not be confused with the convertible notes that are sometimes issued by startup companies. For information about convertible notes in the context of startup finance, see Practice Note, Startup Seed Financings: Overview.

Also known as a convertible note or convertible debenture, a convertible bond is a type of debt instrument that can be converted into another security, usually shares of stock, of the issuing company, usually at some pre-announced ratio based on a fixed number of securities and a set price. It is a hybrid security with debt and equity-like features. Although it typically has a low coupon rate, the holder is compensated with the ability to convert the bond to common stock, usually at a substantial discount to the stock's market price.

For an introduction to anti-dilution adjustment formulas, focusing on public company convertible bonds, see Practice Note, Anti-Dilution Adjustment Formulas in Convertible Bonds.