The percentage by which the conversion price (in a convertible) exceeds the current stock price. The following equation illustrates this:
For example, if a convertible has a conversion ratio of 50 (that is, 50 shares are received in exchange for the bond with a par value of $1,000), and therefore the conversion price is ($1,000/50= $20), then the percentage conversion premium, supposing the share is trading at $15, is:
Percentage conversion premium = (20- 15)/15 = 33.33%
