Convertible Bonds in Spain: A Different Security

Posted: 9 Jul 1998 Last revised: 10 Oct 2015

Date Written: February 1996


Spanish convertible bonds are different from the American convertible bonds. First, the conversion price is not fixed in pesetas, but is defined as a percentage discount off the average share price over a number of days before conversion. Second, the conversion option can be exercised only at a few (usually two or three) different dates. Third, the first conversion opportunity is usually only two or three months after the subscription (issue) date. In the period 1984 to 1990, 248 issues of convertibles accounted for 1.9 trillion pesetas. In this period, companies issued more convertibles than new shares (1.4 trillion pesetas). Several formulas to value Spanish convertible bonds are derived using option theory. Convertibles have been undervalued by an average of 21.6% on average. The expropriation effect in the period 1984 to 1990 accounts for 125 billion pesetas.

Keywords: Spanish convertible bonds, American convertible bonds, average share price

JEL Classification: G10, G32, G13

Suggested Citation

Fernandez, Pablo, Convertible Bonds in Spain: A Different Security (February 1996). Available at SSRN:

Pablo Fernandez (Contact Author)

IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
+34 91 357 0809 (Phone)
+34 91 357 2913 (Fax)


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