The arrangement where an underwriter has the option of selling additional shares when the issue is heavily oversubscribed is known as a:

Question

Quizplus · Accepted Answer

The arrangement described in the question is a green shoe option. This option allows the underwriter to sell additional shares beyond the original offering size if there is high demand for the stock. The name "green shoe" comes from the first company that used this option, the Green Shoe Manufacturing Company.

The Arrangement Where an Underwriter Has the Option of Selling