Answer-first summary for fast verification
Answer: False
**False.** An ESO with vesting restrictions and an indexed strike is indeed a nonstandard American option, but **Margrabe’s formula** is for an exchange option (the right to exchange one asset for another). It is not, by itself, the correct valuation model for an American ESO with vesting restrictions.
Author: Manit Arora
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Q-11(d). True or false: An executive stock option (ESO), with a four (4) year vesting restriction and seven (7) year term, where the strike price is indexed to the S&P 500 could be called a nonstandard American option and could be valued with Margrabe which is a variant of BSM
A
True
B
False
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