Investopedia

Asset Swapped Convertible Option Transaction - ASCOT

Dictionary Says

Definition of 'Asset Swapped Convertible Option Transaction - ASCOT'

An option on a convertible bond that is used to separate a convertible bond into its two components: 1) a bond and 2) an option to acquire stock. When the bond is stripped of its conversion feature, the holder has a bond featuring fairly stable returns on debt, and a volatile - but potentially very valuable - option.
Investopedia Says

Investopedia explains 'Asset Swapped Convertible Option Transaction - ASCOT'

Increasingly, ASCOTs are being bought and sold by hedge funds employing convertible arbitrage strategies to increase their portfolios' leverage. Often, the bond component is broken down into small denomination bonds and sold to individual investors, while the option component is retained if the investor anticipates share price appreciation.

Articles Of Interest

  1. Convertible Bonds: An Introduction

    Find out about the nuts and bolts, pros and cons of investing in bonds.
  2. What is the difference between convertible and reverse convertible bonds?

    The difference between a regular convertible bond and a reverse convertible bond is the options attached to the bond. While a convertible bond gives the bondholder the right to convert the asset ...
  3. What is a convertible bond?

    A convertible bond is a bond issued by a corporation that, unlike a regular bond, gives the bondholder the option to trade in the bond for shares in the company that issued it. This gives the ...
  4. Where does the stock come from when convertible bonds are converted to stock?

    First, let's define convertible bonds. A unique combination of debt and equity, they provide investors with the chance to convert a debt instrument into shares of the issuer's common stock, at ...
  5. Arbitrage Squeezes Profit From Market Inefficiency

    This influential strategy capitalizes on the relationship between price and liquidity.
  6. Making It Big On Wall Street

    Read about some of the most glamorous Wall Street jobs and what it takes to land one.
  7. Quants: The Rocket Scientists Of Wall Street

    Blend math, finance and computer skills to command a high - and well deserved - salary.
  8. Financial Career Options For Professionals

    Find out if spreading your wings to try a new career will make you soar or fall flat.
  9. Why Your Pension Plan Has Sovereign Debt In It

    One type of security pensions tend to invest in is sovereign debt, or debt issued by a government.
  10. 7 Unconventional Ways Businesses Can Borrow Money

    Find out how your business can get the money it needs - even when the bank says "no".
comments powered by Disqus
Marketplace
Hot Definitions
  1. Validation Period

    The amount of time necessary for the premium on an insurance policy to cover the commissions, the cost of investigation, medical exams and other expenses associated with the issuance of the policy.
  2. Winner's Curse

    Because of incomplete information, emotions or any other number of factors regarding the item being auctioned, bidders can have a difficult time determining the item's intrinsic value. As a result, the largest overestimation of an item's value ends up winning the auction.
  3. Glocalization

    A combination of the words "globalization" and "localization" used to describe a product or service that is developed and distributed globally, but is also fashioned to accommodate the user or consumer in a local market.
  4. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.
  5. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.
  6. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.
Trading Center