Asset Swapped Convertible Option Transaction (ASCOT)

An asset swapped convertible option transaction (ASCOT) is a structure in which an option on a convertible bond is used to separate a convertible bond into its two components. The components being separated are the bond with its regular coupon payments and the equity option that functions as a call option. The ASCOT structure allows an investor to gain exposure to the option within the convertible without taking on the credit risk represented by the bond.