This offers the possibility for a floor price for the bond. This floor price is the value of a pure bond discounted at the yield to maturity of similar quality and maturity issues. Well, looks like many ways to examine convertible pricing. This is why arbitrage opportunities can arise with these types of securities and why one should always contact professional help when dealing with securities such as these. The financial markets move very fast.
Situations can happen in a few minutes.
Over the next few days arrange to convert the bond into stock . You now own 20 shares of stock so deliver this stock to cover the borrowed stock . Now you would think that a situation this obvious would not take place and you are correct. I just gave this situation for explanatory purposes. So the firm can force conversion by calling the bond.