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. 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.