• A Convertible Asset Substitution Option Transaction, or ASCOT, is a way of separating the fixed income and equity components from a convertible bond.

  • ASCOT is built by selling an American call option on the convertible bond issuer’s shares at an exercise price that takes into account the cost of unwinding the strategy.
  • ASCOTs allow investors to eliminate credit risk on convertibles and provide opportunities for convertible arbitrage strategies.