Date Added: Sep 2009
Real options present a wide topic in investment literature nowadays. However, despite big advances in the single asset investment pricing, the theory is miser of informations about problems involving more than one asset. The authors show in this paper that using dynamic programming, one can find an analytic trigger for a three assets simple exchange problem. Although they get a forward investment rule, one cannot find the precise option value ex ante but only an average value. The precise option value depends on the first exit time from the continuation region which is stochastic.