A convertible that combines the features of both fixed-income debt and OTC options. In other words, this instrument consists of two components: a fixed-income instrument and an equity call option on the issuer’s stock with a strike price equal to the convertible’s effective conversion price. It separates these two components and sets on the issuance of straight debt with the sale of an out-of-the-money call warrant on the issuer’s common stock.

Companies seeking to raise capital through a convertible bond-like structure can use synthetic convertibles, and in some instances they can sell the components at a higher price than would otherwise be attainable by issuing an ordinary convertible.