Zero-Coupon Convertible Security

A zero-coupon convertible security is a type of financial instrument that combines the features of a zero-coupon bond with those of a convertible security. A convertible security is a type of security that can be converted into a specified number of shares of the issuer's common stock at some point in the future, typically at the discretion of the holder. A zero-coupon convertible security, therefore, is a bond that does not pay periodic interest payments, but that can be converted into a specified number of shares of the issuer's common stock at a predetermined time in the future. This type of security can be attractive to investors who are looking for the potential for both long-term capital appreciation and income from their investments.