An ASCOT, or Asset Swapped Convertible Option Transaction, is an option on a
convertible bond
In finance, a convertible bond or convertible note or convertible debt (or a convertible debenture if it has a maturity of greater than 10 years) is a type of bond that the holder can convert into a specified number of shares of common stock i ...
used to separate the cash flows of the underlying bond from the equity option embedded in the convert. Buyers of ASCOTs include fixed income portfolio managers and other investors that want exposure to the rate and credit risks of the convert issuer; cashflows from the convert would be passed through to these buyers. Sellers of ASCOTs typically include trading desks that want to retain exposure to the potentially lucrative equity optionality.
Further reading
* Calamos, Nick P., ''Convertible Arbitrage: Insights and Techniques for Successful Hedging'',
John Wiley & Sons, 2003, 272 pages. .
* Fabozzi, Frank J., ''The Handbook of Fixed Income Securities, 6th ed.'',
McGraw-Hill
McGraw Hill is an American educational publishing company and one of the "big three" educational publishers that publishes educational content, software, and services for pre-K through postgraduate education. The company also publishes referen ...
, 2005, 1500 pages. {{ISBN, 0-07-144099-2.
External sources
http://moe.ecrc.nsysu.edu.tw/English/workshopE/2006/2006-A4-6.pdf
Options (finance)