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Exchange Option pricing model (Margrabe)

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created by: Thijs van den Berg (http://www.sitmo.com)
Exchange Option pricing model (Margrabe) equation

This option pricing model is known as the Margrabe model for exchange options. The exchange option allows the holder to exchange one asset for another at expiration.

List of symbols

C Price of the exchange option
The value of the first underlying. This is the underlying to which you can exchange.
The current underlying, this underlying can be exchanged into the other.
Yields of the underlyings.
Volatilities of the two underlyings.
Correlation between the two underlyings.
t Time till expiration.

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