The difference between the bond’s price and its equity value or parity, expressed as a percentage:
Premium = (convertible price- parity) /parity
Premium = (convertible price/ parity) – 1
For example, the percentage premium on a convertible bond whose par value is $1,000 and parity is 80% of par (i.e., $800) would be:
% premium = (1000/800)- 1 = 25%
