what is an asset swapped convertible option transaction ascot 
an asset swapped convertible option transaction ascot is a structured investment strategy in which an option on a convertible bond is used to separate a convertible bond into its two components a fixed income piece and an equity piece more specifically the components being separated are the corporate 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 part of the asset it is also used by convertible arbitrage traders seeking to profit from apparent mis pricings between these two components understanding asset swapped convertible option transactionsascots are complex instruments that allow parties to take the role of equity investor and credit risk buyer bond investor in what was initially sold as a combined instrument the convertible bond itself an asset swapped convertible option transaction is done by writing selling an american option on the convertible bond this essentially creates a compound option as the convertible bond already comes with an embedded equity call option itself due to the conversion feature the american option can be exercised by the holder at any time but the strike price paid must include all the costs of unwinding the asset swap 