Exchangeable bond

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Exchangeable bond (or XB) is a type of hybrid security consisting of a straight bond and an embedded option to exchange the bond for the stock of a company other than the issuer (usually a subsidiary or company in which the issuer owns a stake) at some future date and under prescribed conditions.{{cite web|url=http://www.presseportal.de/pdf.htx?nr=1445534 | title = Successful placement by KfW of exchangeable bonds due 2014, exchangeable into shares of Deutsche Post AG | access-date=2015-07-28|date=23 July 2009}} An exchangeable bond is different from a convertible bond. A convertible bond gives the holder the option to convert bond into shares of the issuer.

The pricing of an exchangeable bond is similar to that of convertible bond,{{cite web|url=http://faculty.gsm.ucdavis.edu/~bmbarber/Paper%20Folder/FM%20Exchangeable%20Debt.pdf | publisher=ucdavis.edu | title = Exchangeable Debt | access-date=2015-07-28|first=Brad |last=Barber}} splitting it in straight debt part and an embedded option part and valuing the two separately.