We formulate a general mathematical model for investments in real assets from the perspective of the real options approach. We then derive an analytic expression for its price under a market completeness assumption. This expression is the solution of a stochastic optimization problem. The generality of the model is such that it can also provide a framework for the study of financial options.

Topics
Mathematical modeling, Stochastic processes
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© 2001 American Institute of Physics.
2001
American Institute of Physics
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