annual statement filed by a life insurancecompany in each state where it does business in compliance with that state's regulations. The statement and supporting documents show, among other things, the assets, liabilities, and surplus of the reporting company. Conventional mortgage A loan based on the credit of the borrower and on the collateral for the mortgage. Conventional option An optioncontract arranged on the tradingfloor and traded regularly. The opposite of exotic option. Conventional pass-throughs Also called private-label pass-throughs, any mortgage pass-through security not guaranteed by government agencies. Compare agency pass-throughs. Conventional project A project with a negative initial cash flow (cash outflow), which is expected to be followed by one or more future positive cash flows (cash inflows). Convertible A financialinstrument that can be exchanged for another security or equity interest at a pre-agreed time and exchange ratio. Convertible Arbitrage In the context of hedge funds, a style of management that involves the simultaneous purchase of a convertible bond and the short sale of shares of the underlying stock. Interest rate risk may or may not be hedged. Convergence The movement of the price of a futures contract toward the price of the underlying cash commodity. At the start, the contract price is usually higher because of time value. But as the contract nears expiration, and time value decreases, the futures price and the cash price converge. Conversion In the context of securities, refers to the exchange of a convertible security such as a bond into stock. In the context of mutual funds, refers to the free exchange of mutual fundshares from one fund to another in a single family.Conversion factors Rules set by the Chicago Board of Trade for determining the invoice price of each acceptable deliverable Treasuryissue against the Treasury Bondfutures contract. Conversion feature Specification of the right to transform a particular investment to another form of investment, such as switching between mutual funds or converting preferred stock or bonds to common stock. Conversion parity See: Market conversion price Conversion parity price Related: Market conversion price Conversion parity/value Applies mainly to convertible securities. Common stock price at which a convertible bond can become exchangeable for common shares of equal value; value of a convertible bond based solely on the market value of the underlyingequity. Par value plus conversion ratio. See bond value, investment value, parity. Conversion Period The time period during which an investor can exchange a convertible security for common stock. Conversion premium The extent by which the conversion price of a convertible security exceeds the prevailing common stock price at the time the convertible security is issued. In general usage, the conversion premium is the amount by which the convertible security trades above its conversted value. For example, if a $1,000 par bond is trading at $1,100, it is convertible into 50 shares, and the shares are trading at $21, the converted value is 50 X 20.50 = $1,025, and the conversion premium is $75. Conversion price Applies mainly to convertible securities. Dollar value at which convertible bonds, debentures, or preferred stock can be converted into common stock,