Hemangioma compressed by a cyst. If it is congenital or developed in early infancy, then verrucous hemangioma is favored. If it is acquired later, then angiokeratoma is favored. I also considered microvenular hemangioma, which often shows collapsed lumen; and acquired elastotic hemangioma, which usually occurs in women, on the arms.

epidermoid cyst with surrounding capillary type blood vessels. there is no inflammation and no siderophages, focal epidermal hyperplasia

? capillary type angioma around a cyst

Although, mucin is not quite obvious, but I would still consider superficial angiomyxoma, which contains epidermal component incuding keratin filled cysts in >50% cases. 

Thanks. This is descriptive but fairly novel entity actually. I picked up around 12 cases over the years and I don't think it can be that rare. It's very distinctive histologically.

Seems to be located mainly at sites overlying bony prominences (knee, elbow, hip including greater trochanter) and comprising lichenification, microvenular like reactive vascular proliferation. In some cases there have been preceding inflammatory process (including lichenoid). The infundibular cyst formation is probably secondary. There is a striking loss of elastic in the lesion which I would not expect in solar elastotic (microvenular) haemangioma.

For me it's a reactive process with possible several co-factors but most likely local tissue ischaemia playing a role.

For a reference: 

https://www.ncbi.nlm.nih.gov/pubmed/28374436

Acquired elastotic hemangioma-like changes and eccrine sweat duct squamous metaplasia in lichen simplex chronicus/prurigo nodularis-like lesions of the knee and elbow.