Business and Personal Finance Dictionary

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• MARGRABE OPTION
  
  The option to exchange one asset for another. Margrabe (1978) showed several applications for this sort of option (margin account, corporate exchange offer, and standby commitment) and derived a model for pricing this option. Other people discovered numerous additional examples of this option. The Cross Currency Option (q.v.) is a prime example. The option goes also by the names Exchange Option (q.v.) and Outperformance Option (q.v.). Source: Gary L. Gastineau and Mark P. Kritzman, Dictionary of Financial Risk Management, Frank Fabozzi, 1996.
  
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