Parity price refers to a price level that sets two assets or securities equal in value to one another. It is a concept that is used in several markets, including fixed income, equities, commodities, and convertible bonds.
For convertible bonds, the parity price concept is used to determine when it is financially beneficial to convert a bond into shares of common stock.
Investors often have to make decisions about the relative value of two different investments.
In addition to using parity price for convertible security, investors can use it to make investment decisions about commodities and currencies.
Parity price can help determine the value of stock options because parity is defined as the price at which an option is trading at its intrinsic value. In addition, the concept of parity is also used to compare the value of two currencies.