important difference in Carrot and Stick Bond
cs executive security and capital market notesCarrot and Stick Bond Variation of the asset backed securities instrument is the carrot and stick bond. The carrot is lower than normal conversion premium i.e. the premium over the present market price of the equity shares is fixed at a reasonable level so that the price of the equity shares need not increase significantly to make conversion practical.
The stick is the issuer’s right to call the issue at a specified premium if the price of the equity shares is traded above a specified percentage of the conversion price.