Margrabe's option to exchange in a Paretian-stable subordinated market

This paper derives the formula for a European option to exchange one asset for another provided that the underlying asset price is logstable. Using the subordination principle of Feller first applied by Hurst, Platen and Rachev to option pricing, we can extend former results of Margrabe to a richer class of stochastic processes which are able to better capture empirical asset return distributions. The obtained option price can be used as a building block in the context of real option valuation.