Asset Swapped Convertible Option Transaction - ASCOT

Another Tom Wolfe special! (See: Asset-Backed Commercial Paper Money Market Fund Liquidity Facility)
Stocks and bonds offer different ways to invest in a company. They operate differently and have different pros and cons. Meanwhile, there are securities - called convertible bonds - that offer aspects of both types of investment. An asset swapped convertible option transaction re-separates these functions - splitting the bond and stock parts of a convertible bond.
A bond represents a loan. When you buy a bond, you are basically loaning money to a company, the grown-up version of spotting a buddy a few bucks for dinner. Eventually, hopefully, your buddy (or the company) will pay you back.
A stock, on the other hand, represents the purchase of ownership, or at least a part ownership. You aren't owed any money, as you would be with a bond, but you hope to make money as the company grows. As the company's value increases, the stock's value increases as well.
A convertible bond combines these investments. It is a bond, paying a yield and coming with a promise of repayment. However, the security also comes with an option to convert it into stock (hence the "convertible" part). So if you want, you can, under conditions laid out in the convertible bond, change the bond into a certain amount of stock at a certain price.
Here's the trade off, though: to convert into stock, you have to give up the bond. No more yield. No more guaranteed payments.
The ASCOT presents a "have your cake and eat it too" opportunity. The mechanics of the transaction are relatively complicated. But the result is splitting the bond part of the convertible bond from the stock part. You can hold the bond, with all the yield and guaranteed return, while still getting the upside available from owning stock.