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  6. Price of CBs (Parity and Deviation rate)

Overview

Price of CBs (Theoretical Price)

Parity is the theoretical price of a CB.
The parity of a CB can be derived by the following formula.

Parity = (Share price / Conversion price) x 100 (yen)

In other words, if the stock price is 1,200 yen and the conversion price is
1,000 yen, the parity is
(1,200 yen / 1,000 yen) x 100 = 120 yen.

Deviation Rate

However, the price of CBs is not always in line with parity, as it is affected by market supply and demand, stock prices, interest rates, and other factors.
The difference between the parity and the actual CB price (market value) in the market is called the deviation rate.
The deviation rate is calculated by the following equation.

Deviation = ((Market value of CB - Parity) / Parity) x 100 (%)

In the above example, if the market value of the CB is 125 yen, then the deviation is
(125 yen - 120 yen) / 120 yen) × 100 = 4.17%.
If the market value of the CB is lower than parity, the deviation rate will be negative.