A futures contract which entails the exchange of one asset for another (such as cross currency options). Essentially, this option represents a spread option with a strike price equal to zero. A spread option is an option whose underlying is a spread such as a price spread, credit spread, calendar spread, etc.

The Margrabe option was Invented in 1978 by the US risk-management consultant William Margrabe who also devised a formula for determining its price.

It is also called an exchangeable option, an exchange option or an outperformance option.