The market value of the shares of common stock into which a convertible can be exchanged. This value is equal to the stock price multiplied by the conversion ratio. For example, suppose a convertible can be exchanged for 20 shares, and the current price of the share is $10, then its parity value is:
Parity value= stock price x conversion ratio = 10 x 20 = $200
It measures the equity value of the convertible bond, i.e., the current value of the package of shares into which the bond can be converted. If immediate conversion is permitted, it should not be possible to purchase a convertible for less than its parity value.
