Replication (synthetic asset) transaction
Replication (synthetic asset) transactions and mandatory convertible securities are listed as charges for R1 and R2. Is this correct? And if so, how can we tell if it should be included in r1 or r2 in a problem? If it isn’t clear if it is equity or fixed investments, do we just make an assumption and allocate it all to one or the other?
Comments
This is the relevant note on Odomirok page 261:
". . .Half of the charge for RSATs and mandatory convertible securities is applied to R1, with the remaining half applied to R2. This assumes that half of the securities in the calculation are fixed income and half are equity."