The sensitivity of a convertible’s price to changes in parity value. More specifically, it measures the equity sensitivity of the convertible. It is conventionally expressed as the change in convertible price for a unit change in parity. Accordingly, a delta of 30% indicates that if parity increases by one basis point, the convertible price will rise by 0.3 points (that is 30% of the one basis point change in parity).

The convertible’s delta approaches 1.0 as the convertible moves deep in-the-money because in this case it behaves more like its underlying stock as the share price gets higher than the conversion price. A delta of 1.0 indicates that the convertible will move up or down by the same proportion of change in the common stock. The convertible behaves more like fixed income securities as the common stock price falls below the conversion price. It will reach its full fixed income value when the delta approaches zero as the stock price drops lower and lower.