(1) A bond feature by which the owner may exchange his or her bonds for a specified number of shares of stock. Interest paid on such bonds is lower than the usual interest rate for straight debt issues. See Conversion Parity; Conversion Price; Conversion Ratio. (2) A feature of some preferred stock by which the owner is entitled to exchange preferred for common stock, usually of the same company, in accordance with the terms of the issue.(3) A feature of some mutual fund offerings allowing an investor to exchange shares for comparable value in another fund with different objectives handled by the same management group. (4) A term used to describe the creation of a call option from a put option by means of taking a long position in the underlying equity.