as specified when the convertible is issued. Conversion ratio Applies mainly to convertible securities. Relationship that determines how many shares of common stock will be received in exchange for each convertible bond or preferred stock when a conversion takes place. It is determined at the time of issue and is expressed either as a ratio or as a conversion price from which the ratio can be figured by dividing the par value of the convertible by the conversion price. Conversion value The value of a convertible security if it is converted immediately. Also called parity value or converted value. Converted put See Synthetic Put. Convertibility The ability to exchange a currency without government restrictions or controls. Convertible adjustable preferred stock (Caps) The interest rate on caps is adjustable and is pegged to Treasurysecurity rates. They can be exchanged at par value for common stock or cash after the next period's dividend rates are revealed. Convertible arbitrage A practice, usually of buying a convertible bond and shorting a percentage of the equivalent underlyingcommon shares, to create a positive cash flowposition (with expected returns above the riskless rate) in a static environment and benefit from capital appreciation should the convertible's premium rise. This form of investing is far from riskless and requires constant monitoring. See: Chinese hedge and setup Convertible bond General debtobligation of a corporation that can be exchanged for a set number of common shares of the issuing corporation at a prestatedconversion price. Convertible eurobond A eurobond that can be converted into another asset, often through exercise of attached warrants. Convertible exchangeable preferred stock Convertible preferred stock that may be exchanged, at the issuer's option, into convertible bonds that have the same conversion features as the convertible preferred stock. Convertible 100 Goldman Sachs index of the 100 convertibles of greatest institutional importance. Weighted by issue size, it measures the performance of its components against that of their underlyingcommon stock and against other broad marketindexes as well. Convertible preferred stock Preferred stock that can be converted into common stock at the option of the holder. See also: participating convertible preferred stock. Convertible price The contractually specified price per share at which a convertible security can be converted into shares of common stock. Convertible security A security that can be converted into common stock at the option of the securityholder; includes convertible bonds and convertible preferred stock. Convex Curved, as in the shape of the outside of a circle. Usually referring to the price/required yield relationship for option-free bonds. Convexity Property that a curve is above a straight line connecting two end points. If the curve falls below the straight line, it is called concave. Cook the books To deliberately falsify the financial statements of a company. This is an illegal practice. Cooling-off period The period of time between the filing of a preliminary prospectus with the Securities and Exchange Commission and the actual public offering of the securities. Cooperative An organization owned by its members. Examples are agriculture cooperatives that assist farmers in selling their products more efficiently and apartment buildings owned by